NEW YORK, Sept 19 (Reuters) - Restricted Securities Trading Network, a telephone-based trading marketplace, is launching an electronic platform to create a more “efficient” market for trading private, restricted public and distressed securities.
Barry Silbert, chief executive of Restricted Stock Partners, the platform’s parent company, thinks the timing for bringing this electronic network to market is just right.
The company, which derives its revenue from commissions on transactions, was initially formed as a marketplace for unregistered public-company securities, such as warrants, convertible notes and convertible preferred stock.
Now it expects to see an increase in the trading of private company securities, driven largely by a slew of investment banks setting up platforms dedicated to trading privately issued securities.
The fast-growing private placement market reached $162 billion last year, outpacing the $154 billion raised in public offerings, according to data from the Nasdaq Stock Market (NDAQ.O).
Turbulent market conditions are expected to lead to a third growth area for the new network
“We are preparing for the ultimate downturn in the market to be a marketplace for distressed securities — pre- and post- bankruptcy,” Silbert said.
Think Match.com for securities restricted from trading on public markets.
“We are soup to nuts. We are getting the bids. We are getting the price ... and at the point the buyer and seller agree on terms, our company does all the clearing and settlement,” he added.
The company — which has been testing a beta version of the electronic platform with some of its 300, mostly institutional, members in recent months — has been able to speed up the launch of its electronic platform because of an investment, of an undisclosed amount, from hedge fund Pequot Capital Management, it said on Wednesday.
The electronic market is expected to launch early next month to registered buyers and sellers.
The launch of the Restricted Securities Trading Network comes on the heels of major U.S. investment banks and stock exchanges building their own platforms to trade restricted stock, primarily unregistered shares from private companies, called “144a issues” because they are issued under the U.S. Securities and Exchange Commission’s 144a rule.
Goldman Sachs Group Inc (GS.N) launched its Tradable Unregistered Equity system, or GSTrUE, in May.
JPMorgan Chase & Co (JPM.N) came to market with a similar platform, dubbed “144A PLUS” and other major Wall Street banks, including Citigroup Inc (C.N), Lehman Brothers Holdings Inc LEH.N, Merrill Lynch & Co Inc MER.N and Bank of America Corp (BAC.N), banded together to set up a system, dubbed “OPUS-5,” to trade privately placed stock.
Last month, Nasdaq Stock Market Inc (NDAQ.O) launched its own platform for private securities called Portal and this week, NYSE Euronext NYX.NNYX.PA, parent company of the New York Stock Exchange, said it was exploring the private- placement business.
Many see the numerous private-placement platforms eventually merging.
“Twelve months from now, I think the landscape will be pretty different,” said Silbert, who is in talks to find a way for his Restricted Securities Trading Network to work with the banks’ platforms.
“We are speaking with the various banks involved to figure out the best way to interact with them on both private and public restricted securities,” he said. “Ultimately we believe our platform is complementary because what we are bringing to the table is liquidity.” (Reporting by Lilla Zuill)