Trying to explain what sight-seen and sight-unseen bidding are is at once easy and confusing.
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The market for sight-unseen coins is predominantly for "generic" gold coins, like this 1926 Saint-Gaudens gold $20 double eagle coin and other coins with large populations, several experts told Coin World.
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Images courtesy of HeritageCoins.com. There is little market for sight-unseen trading of certain collector coins, like the 1916-D Winged Liberty Head dime, one expert said.
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"Sight-seen" and "sight-unseen" bidding are terms describing ways that dealers can buy and sell coins through dealer-to-dealer networks. But, it turns out, it's much more complicated than that.
At the basic level, someone buying a coin "sight seen" has the option, once they've seen the coin, to buy it at a price already established between buyer and seller for a coin from a specific grading service and in a specific grade, or they can reject the purchase.
Buyers engaging in "sight-unseen" purchases may submit their bid for coins they wish to purchase, again for pieces certified by a third-party grading service, but without seeing the coins before agreeing to the deal.
The ability to pick-and-choose coins under the sight-seen method generally means those coins receive higher prices.
Technology changes market
As technology has evolved, the means and methods by which dealers trade coins has changed.
In the 1960s, dealers used teletypewriter systems that transmitted their bid and sell messages to other dealers on the network.
Under that system, according to David Hall, president of Collectors' Universe, dealers bought coins as a sight-seen item; that is, they could view coins sent to them before committing to purchase the coins. Dealers could reject the coins for any reason; the sale hinged on their acceptance of the coin at the stated price.
According to John Feigenbaum of David Lawrence Rare Coins, sight-seen bidding is plagued with problems because of people who abuse the system.
Feigenbaum used the example of a dealer who places high sight-seen bids for 10 Saint-Gaudens gold $20 double eagles, but then rejects all but one of the coins.
In this instance, the price the dealer would pay for the one coin doesn't truly reflect the value of most coins in that grade, so the pricing data is out of kilter with the true value.
Feigenbaum's scenario was more likely before the advent of third-party grading services.
These days, dealer-to-dealer trading operates in a more sophisticated manner, made possible by the advent of certified coins.
The debut of PCGS in 1986 helped create a market for certified coins, several dealers and experts said, and a sight-unseen market.
According to Feigenbaum, "The idea was that as coins were graded, the grade, backed by the company's reputation, would allow the coins to be traded without being seen."
Certified Coin Exchange
In 1990, the Certified Coin Exchange was created as a system built for the sole purpose of enabling sight-unseen bidding.
This system has created a more orderly market than the random buy/sell messages of the days of old, according to Coin Values Market Analyst Mark Ferguson (Coin World, Nov. 18, 2002, issue).
"Sight-unseen" trading means coins are sold without prior examination by the buyer during a dealer-to-dealer transaction, through a trading network like CCE.
At CCE, dealers now post bid and ask prices for particular coins, either on a "sight-unseen" or "sight-seen" basis. Buyers are obligated to buy at the posted prices, governed by specific trading rules for sight-seen and sight-unseen transactions. (The CCE originally allowed only sight-unseen bidding.)
Collectors can visit the Web site of the Certified Coin Exchange at www.certifiedcoinexchange.com.
One publication, the Certified Coin Dealer Newsletter, also known as the "Bluesheet," tracks bid and ask prices for sight-unseen coin purchases, and its sister publication, the Coin Dealer Newsletter (aka "the Greysheet,") publishes prices for sight-seen transactions.
While dealer-to-dealer trading prices are only accessible to subscribers of the CCE, the site openly lists coins for sale to collectors, as well as buy prices for specific coins, both from numerous member dealers across the country.
According to the CCE, more than 100,000 bid and ask prices are posted on the network at any one time.
Bid and ask prices are posted at CCE for coins graded by PCGS, Numismatic Guaranty Corp., ANACS and Independent Coin Grading.
More than 150 member firms have the capability to place bid and ask prices and to execute trades against these prices at CCE.
Another 275 associate members subscribe to view CCE prices and either trade based on these prices with other dealers, or propose transactions to the member firms that are posting these prices.
According to Feigenbaum, sight-unseen bidding is fairly limited to coins certified by PCGS and NGC.
Sight-unseen bids are bound and can't be rejected as the sight-seen bids can be, again, because of the expectation that the coin you're bidding on meets a certain level of quality based on the grade as determined by a grading service.
Serving some, but not all
"It worked great," Hall said of the sight-unseen market, but it didn't serve some collectors, he noted.
"Some people like toned coins. Some people like white coins, and some like sharply struck coins. Why someone would use it, and what they would use it for, is a dealer-by-dealer choice, an issue-by-issue choice," Hall said.
The sight-unseen system has its limitations, according to Feigenbaum. "The sight-unseen market is not very robust."
Feigenbaum said that certain coins are more likely to be sold through a sight-unseen system, like "type" coins, generic silver dollars and generic gold (like common Saint-Gaudens double eagles).
Buying wisely
Hall said that with some coins, it makes no sense to buy them at sight-seen prices, which are generally higher than sight-unseen prices (because there's less risk and the aspect of choice).
"Some issues always come nice, so it makes no sense to [buy them at sight-seen prices]," Hall said, pointing to Matte Proof gold coins, common-date Morgan dollars and other high-population issues.
"Gold basically is what it is, but some silver coins have a variation of color," he said. "I'm more comfortable bidding sight unseen for gold than silver."
Feigenbaum agrees with Hall, noting that one series of coins comprising a large portion of the sight-unseen market are so-called "generic" gold coins, like Coronet and Saint-Gaudens gold $20 double eagles in Mint State 63, MS-64 and MS-65 conditions.
These generic gold coins are attractive to "bulk buyers trading the coins like they're commodities," Feigenbaum said. "There's not a numismatic aspect to the service. I've never placed an order that way – it's never been useful to me."
Feigenbaum said that, conversely, some coins should never be bought sight unseen.
"Collector coins should never be bought sight unseen. We have to see them. I don't want to buy a pig in a poke."
Feigenbaum noted that there is little demand or use for sight-unseen buying and selling when it comes to Seated Liberty quarter dollars, other Seated Liberty coins and Barber quarter dollars. This also holds true for high-grade type coins, he said.
"Nobody would bid on a 1916-D [Winged Liberty Head] dime sight unseen," Feigenbaum said. The 1916-D Winged Liberty Head dime is the key date to the series.
John Albanese, who led the creation of Collectors Acceptance Corp., also concurred, noting that it comes down to different classes of buyers for different coins.
After reviewing submitted coins, CAC applies a green hologram sticker on coins it determines are exceptional for the grade. According to Albanese, he and other investors have created a $25 million market backing the coins.
He said the sight-unseen system works for the "hoarder, pack rat, investor type" buying the aforementioned gold coins as "a bullion substitute."
Several weaknesses are inherent with the sight-unseen system, Feigenbaum said. One of the problems: "People really want to see the coins they're buying."
Another issue is that the price spread between sight-seen and sight-unseen coins makes it unattractive to sellers to offer the coins sight unseen.
"If a Seated Liberty dime grading MS-65 is at $575 sight unseen, but at $750 for sight seen, who's going to want to sell it sight unseen?" Feigenbaum asked.
The price spread is a factor of dealers being bound to buy coins that could be "bottom-of-the-barrel" coins, writes Maurice Rosen in the May 2008 issue of The Rosen Numismatic Advisor.
The sight-unseen system depresses the market for "solid-for-the-grade" coins, Rosen and Albanese said.
Rosen writes: "The sight unseen bidding system recognizes the ugly truth that the worst coins in holders might be put to a dealer forced to pay his bid. His defense? Lower his bids to provide for that contingency."
That depresses prices for the better coins, so-called "A" and "B" coins, for that grade, Albanese told Rosen.
Feigenbaum mentioned the creation of CAC as one thing that may change the sight unseen market.
The difference between it and third-party grading services is that "PCGS never created a financial network backing the coins," Feigenbaum said.
CAC functions as a clearinghouse for wholesale sales of rare U.S. coins to dealers willing to make a market in those coins and wanting premium-quality coins, Albanese said at the time CAC was announced in August 2007.
CAC has been distributing to dealers "sight-unseen" buy lists of type coins of most metals.
It may be too early to detect what role CAC will play in the market, but Feigenbaum and Albanese agree that CCE has little impact on the market today.
Albanese said the only sight-unseen coins he buys are those given CAC's stamp of approval, and that the prices on CCE are too low.
Feigenbaum concurred.
"[CCE is] kind of grandfathered in to the marketplace. It's a legacy – it doesn't need to go, it doesn't need to stay, it's just there," Feigenbaum said. "It's comfort food but it doesn't matter much to the marketplace."
