Lending Club’s Note Trading Platform Facade: An Examination of Peer-to-Peer (P2P) Lending Secondary Market Inefficiency

Stephen Harvey


The original objective of the study was to monitor and analyze the inefficiencies in Lending Club’s Peer-toPeer (P2P) secondary market, in order to exploit these inefficiencies for a risk-free return. Upon a threemonth examination and analysis of the secondary market, the findings indicate that arbitrage conditions do not exist as a result of the observed volume of the marketplace being vastly lower than initially believed. Only 0.44% of note listing instances on Lending Club’s secondary market over the three-month period resulted in successful trades. As a consequence, investors assume a purported level of liquidity that is never met, thus they may incur a higher level of risk than initially estimated on the primary market at the time of issuance.