The Marketocracy rules are divided into 3 sections:
These are the most stringent rules for virtual portfolios. Funds must adhere to the compliance rules in addition to the general rules in order to qualify for official rankings.
These rules are general site usage rules and apply to all members and visitors.
These rules are enforced for all portfolios. If you’re using the Marketocracy site for learning purposes, and not for the competition, these are the ones you need to pay attention to.
The following are additional rules required only for individuals who wish their funds to be given an official Marketocracy Performance Ranking. Performance Ranking is an educational and skill metric, it is not a chance contest or game; there are no prizes. Ranking is required for individuals wanting consideration as fund managers, but ranking is not an offer of employment. Individuals who are using Marketocracy's tools solely for their own education and personal use will not be subject to the following rules. We supply a compliance report to help you track your compliance for each of your virtual funds.
1. To qualify for ranking, funds must have a start date prior to the beginning of the ranking period. For example, for a fund to be ranked for Q1, it must be started on or before Dec 31st. Funds started during a ranking time period will be automatically considered for the following time period.
2. Just like real mutual fund portfolios, all model funds at Marketocracy must pass a diversification test. In our case, funds are considered "non-diversified" mutual funds. Here's how the Marketocracy diversification test works: For a majority of each period, your fund must meet guidelines that are similar to SEC and IRS rules regarding fund position concentrations. For your fund to be "non-diversified":
- No position can exceed 25% of your total portfolio value.
- Half your portfolio must be comprised of positions under 10% each.
- Your cash position isn't limited by this guideline, although you must be 65% invested, see below (but if you've got too much cash, your performance may suffer!).
Take a look at this example: Let's say that your $1,000,000 fund holds 23% of total assets in Apple, a 22% stake in Lucent, and 8% stakes in Cisco, Yahoo, Amazon, and Charles Schwab - with the balance in cash. This fund complies with the diversification test because the Apple and Lucent positions, totaling 45%, or $450,000, make up less than half of the fund's value, with neither position exceeding 25% (or $250,000). In the other half of the fund, no one position (excluding cash) totals more than 10% of fund assets.
Funds that do not pass the quarterly diversification test will be disqualified from the Marketocracy Performance Rankings.
Funds will also be monitored for style drift. For a majority of each quarter, both general and industry specific funds must have at least 65% invested in stocks corresponding to their investment focus. Cash is not considered a qualified investment when calculating the 65% investment threshold. All funds, regardless of focus, must be 65% invested in securities a majority of the time.
Funds that fail to meet these criteria will be disqualified from the Marketocracy Performance Rankings. Your fund must be in compliance with the diversification testing and style drift for a majority of the period in order to be considered for ranking.
3. No member may buy into a position that is greater than 25% of the fund value. If you violate this rule, your fund will be out of compliance until you sell enough of the errant stock to bring its value below 25% of your fund's total value AND you have brought your fund back into complete compliance with ALL other Marketocracy rules. In addition, the effective inception date of your fund will be reset to the date that you bring the fund back into compliance with ALL Marketocracy rules.
For example, if a fund violates the "25% rule" on September 14, 2003, then comes back into compliance on October 20, 2003, the effective start date for the fund will be October 20, 2003. The fund will not be eligible for year 2003 fourth quarter ranking, as its effective start date is after the beginning of the fourth quarter. In addition, the fund will not be eligible for m100 rankings until 6 months after October 20, 2003, and will not be eligible for ITD rankings until one year afterwards.
Note that while a position in the fund may appreciate above the 25% cap, even an appreciation to over 25% will have to be adjusted in order to meet the compliance rule for a majority of the period.
4. No fund can hold more than 25% of invested assets in Exchange Traded Funds (ETFs) for a majority of the quarter. ETFs include exchange traded indices such as QQQ.
5. To further simulate the experience of running an actual mutual fund, the top funds ranked by quarterly performance in each fund category may receive fantasy cash "inflows" or new investments on a periodic basis in the following quarter. Similarly, a certain number of the worst performing funds in each fund category may have fantasy cash "outflows", or redemptions of cash, in the following quarter. Fantasy cash inflow and outflow amounts will be calculated based on performance ranking and are credited to, or debited from, funds at times and in amounts that are at the sole discretion of Marketocracy, Inc. Cash inflows and outflows do not change your fund's NAV; however, having extra cash on hand from new investments in the fund, or having to sell positions to raise cash for fund redemptions, may affect fund performance.
6. In order to qualify for ranking, individuals must have, and must certify that they have, only one account on the Marketocracy website. Individuals with multiple accounts will be disqualified.
7. In order to qualify for ranking, funds cannot be set up that simply mirror other existing funds (either virtual funds on Marketocracy or existing funds in the market.) Marketocracy reserves the right to disqualify such "mirror" funds. A fund is considered a “mirror” fund if the holdings overlap with another fund (real or virtual) in excess of 50% of total fund value.
8. To qualify for rankings in a particular sector, your fund must have 65% of its invested assets (excluding cash) in a given sector. Marketocracy currently uses the S&P Global Industry Classification Standard (GICS) to sort stocks into sectors. (For further details regarding GICS, see the S&P website). Companies are classified into each sector by S&P, and that is the classification utilized on the site. Check your Sector report for each Marketocracy fund to get a breakdown of your portfolio by sector.
Funds that qualify for a given sector will automatically be considered for sector rankings, as long as they meet all compliance rules. All compliant funds, regardless of sector, are eligible for the overall rankings. It is not necessary to be in a particular sector to qualify for the overall rankings, this rule only applies to those who wish their funds to be eligible for sector rankings. To get a breakdown of a fund by sector, click on the fund's name, then click on the "sectors" link under the "my funds" heading in the left navbar.
9. No trading of options, bonds, futures, commodities or mutual funds is permitted in order to qualify for ranking.
10. Funds will be allowed to have a negative cash balance of up to 5% of total assets under management in order to provide a buffer for filling orders and charging management fees. In the event that a member’s fund develops an excessive negative balance, it may not total more than 7 days per quarter and it must be cleared by the end of each calendar quarter in order to qualify for ranking. Negative balances are to cover short-term differences in cash needs versus available cash, not to fund purchases (i.e. margin purchases).
11. Marketocracy Inc. and its wholly owned subsidiaries do not guarantee employment consideration based on performance rankings. Marketocracy's goal is to utilize the virtual track records on our website to find the best investors in the world. Marketocracy Inc. and its subsidiaries reserves the right to consider the performance rankings as an initial screening device for future potential candidates. Marketocracy reserves the right to apply additional employment criteria in its consideration of any candidate.
12. Rankings are determined during each time period based on the information we have at hand at the end of each time period. In order to be eligible for ranking, a fund must a) be created before the start of the ranking period and b) comply with all Marketocracy rules for at least 50% of the ranking period.
In addition, to be eligible for inception-to-date (ITD) rankings, the fund must be at least one year old. For m100 rankings, the fund must be at least 6 months old. The minimum required fund lifespan will increase as the number and lifespan of compliant Marketocracy funds continues to rise.
Note that if you violate the rule against buying into a position that is greater than 25% of the fund's value, the effective inception date of your fund will be reset to the date that you bring the fund back into compliance with ALL Marketocracy rules.
If a member feels an error has been made in their account regarding their virtual funds' performance or compliance calculations, the member must contact Marketocracy via firstname.lastname@example.org prior to the end of the period in question. Marketocracy reserves the right to make the final judgment on all performance ranking.
13. You must provide a valid email address in order to qualify for the m100.
By becoming a member of the site, all participants understand that the following rules will apply to each fund created.
14. Each registered member of Marketocracy will be allocated $1,000,000 (US) in fictional Marketocracy dollars to manage per fund. Each registered member may build and track up to 10 unique funds, each with a limit of 200 stocks.
15. Members may register and create funds at any time. All funds will be tracked by calendar quarter performance, year to date performance, and by performance since fund inception.
16. Each fund will be tracked and ranked based on the change in its net asset value (NAV) over a specific period of time. Specifically, fund performance at Marketocracy, and among professional mutual funds, is measured by calculating the change in NAV during a defined period of performance ranking. The NAV of an investment fund is calculated by dividing the current value of its holdings by the number of shares outstanding. All model funds at Marketocracy will begin with $1,000,000 in fantasy cash, with 100,000 shares outstanding and a $10.00 NAV. For a further explanation of the Net Asset Value methodology, click here.
17. Marketocracy has endeavored to create a real-world stock market simulation for our model fund managers. We believe that the best long-term fund performance comes from investing in good companies, not from day trading. While our trading system mirrors the real world as closely as possible, investors who prefer to capture quick gains may find day trading on our system more difficult than actual online day trading through an eBroker.
18. Registered participants may select equities for their funds from those traded on the New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and OTC market (NASDAQ) (herein "the Real Market"). The NYSE, AMEX, NASDAQ and OTC are open from 9:30 a.m. to 4:00 p.m. ET. After hours trading will not be permitted. Stock price quotations on the Marketocracy web site are delayed at least 20 minutes. All trades occur on the Marketocracy market rather than in the Real Market. Orders submitted for entry outside of normal trading hours, 9:30 a.m. to 4:00 p.m. ET, will be entered into the appropriate order book for execution at the opening of the following trading day. These orders will be subject to communications delays and availability. Simulated order executions for fund trades are based on the actual reported trades of NYSE, AMEX, NASDAQ and OTC stocks, on a share for share basis, following a minimum 20-minute order delay. Marketocracy executes all fund orders with at least a 20-minute delay, subject to other orders in the order book, market conditions, system performance and other factors.
19. Market and limit orders are accepted, as are day and good til cancelled (GTC) orders. GTC orders will remain active for 14 days, at which point the order will be closed.
Open orders will be adjusted for stock splits and stock dividends. Note that since splits and dividends are not credited until after the market close, it is possible that an order will execute before the split has been applied. The stock will be credited to your account when the split is applied. Other corporate actions (de-listing, mergers, etc.) will cause an open order to cancel.
Open orders may be cancelled, but you will receive any shares that have already filled by the time the cancellation has been processed. (Practically speaking, this means that while the market is open, market orders for high volume stocks are likely to fill before they can be cancelled.)
To provide as realistic a simulation as possible, the Marketocracy trading engine uses live data feeds from the major stock exchanges, but fills open tickets at a fraction of the total real market volume. This means that orders for small, illiquid stocks can take days or even weeks to fill.
20. Negative balances will be charged a virtual interest charge of Federal Funds rate plus 3%. The Federal Funds rate is updated monthly, or upon official change in rates, whichever is first. Interest is calculated and debited daily.
21. Splits and acquisitions are processed after market close on their effective date. Account values may temporarily be misrepresented until reconciliation occurs. Un-reconciled stocks may be unavailable for trading.
22. Cash dividends are paid on the pay date based on the number of shares owned on the record date.
Stock dividends are paid on the pay date. If the dividend ratio is greater than 25%, payout will be based on the share count prior to market open on the pay date. If the dividend ratio is less than 25%, the payout will be based on the share count on the day of record.
Note that there will be variation from the general rules for splits/acquisitions/dividends, as corporate actions are sometimes complex.
23. All executed fund trades will be charged a commission of $0.05/share, with a maximum commission charge of 5%. All funds will be charged an annual management fee of 1.95% (195 basis points) of assets under management. The management fee will be calculated and debited daily. Sales will be charged an SEC fee on the proceeds of the sale divided by 30,000. End of day fantasy cash balances will earn annual interest based on the Federal Funds Rate, less 2%. The Federal Funds Rate is updated monthly, or upon official change in rates, whichever is first. Interest is calculated and credited daily. All such fees and charges, are, of course, in fictional dollars.
24. No margin buying or short selling is allowed, as we want to be able to offer the investing public funds based on our members' performance, and SEC approval for funds that are allowed to short is much more difficult. Note that Marketocracy may expand to allow short selling in the future.
Visitors and members using the site understand and agree to the following rules.
Marketocracy.com is subject to change, modification or termination without notice. The site and its content are subject to conformance with all applicable laws, rules and regulations.
Marketocracy assumes no responsibility for any computer, online, telephone or technical malfunctions; or market delays or closings that may occur. Model portfolios (hereto referred to as "funds") will be declared made by the authorized account holder of the email address submitted to us at the time of entry. "Authorized account holder" is defined as the natural person who is assigned to an email address by an Internet Access Provider, online service provider or other organization that is responsible for assigning email addresses for the domain associated with the submitted email address.
Each member of Marketocracy may select his or her own screen name. By becoming a member of Marketocracy, individuals agree to have their screen name and fund performance information displayed on the site where Marketocracy deems appropriate. Individuals desiring to become fund managers must agree to be profiled both on and off the site. Marketocracy reserves the right to change inappropriate or offensive screen names. Members may not use "Marketocracy" or any other trademarked item in their fund names or screen names.
Marketocracy reserves the right to disqualify portfolios or suspend trading in certain securities, or certain types of trades not specified under the rules, due to fast markets, or other unusual trading situations and conditions beyond the control of Marketocracy. While Marketocracy has built a realistic trading interface, the company does not guarantee system availability, which may from time to time be impacted by conditions beyond the control of our computer system engineers. No corrections or adjustments for transactions affected by system downtime will be made.
Participation in rankings is at the sole discretion of Marketocracy. The criteria for rankings may be changed at any time without notice. Members who fail to abide by Marketocracy's rules, fail to follow instructions from staff members, or otherwise engage in behavior that would reflect poorly on the reputation of Marketocracy may be disqualified from rankings and/or banned from the site.
Members agree not to make use of material, non-public information in their virtual trades. Marketocracy will perform routine surveillance on the virtual portfolios on the website, and investigate suspicious trading activity. We will disqualify any member whose trades, as a result of our analysis, are deemed to have been made using unethical or illegal methods.
Some market data is provided for informational purposes only and is not intended for trading purposes. Marketocracy shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon.
Marketocracy Inc. and the model portfolios created on its web site are intended for a member's personal, non-commercial use only. Model portfolios, trades and results are the property of Marketocracy, Inc. Members may not copy, modify, transmit, distribute, display, perform, publish, reproduce, license, transfer or sell any derivative works, software, products, reports or services obtained or developed from this site without written permission from Marketocracy, Inc. Please note: Some forms of reproduction will require you to pay a licensing fee.
Marketocracy Model Portfolios cannot be used for any form of gambling.
Model portfolio methodology and performance tracking audited by Tait, Weller & Assoc.
Soliciting of members is not allowed. If a member is found to be soliciting other members, his/her membership will be terminated.
Marketocracy and all other names, logos, and icons identifying our services are proprietary service marks of Marketocracy. Unauthorized use of any material contained on the Site may violate various laws, regulations and statutes. Patents pending.
Void where prohibited. All applicable taxes, if any, are the responsibility of member.
By becoming a member, you grant of permission for Marketocracy to use member's name, likeness, image, portfolio information and results without additional compensation.
Becoming a member or engaging in fund operation is acceptance of all Rules.
Marketocracy reserves the right to resolve any disputes with or between members and its decisions shall be final.
Marketocracy Inc. reserves the right to modify these rules or terminate any program, feature, portfolio, report, fund, site, offering or analytical tool at any time without prior notice.
If you have questions about the rules, please email email@example.com.