NEW YORK (Reuters) - Twelve Wall Street firms that had launched competing platforms for trading unregistered securities known as 144a issues have agreed to cooperate on a single platform operated by the Nasdaq Stock Market (NDAQ.O), the exchange said on Monday.
The move, a result a two months of negotiations between the second-largest U.S. stock exchange and the firms, will bring liquidity and transparency to a market that has so far been “opaque,” said Nasdaq Chief Executive Bob Greifeld in an interview.
Greifeld said the 144a market will see strong growth in trading volume.
“We’ll have great growth stats in the years to come with respect to the volume of trading,” Greifeld said.
Companies are increasingly turning to private investors, known as qualified institutional buyers with at least $100 million in assets, to raise capital through 144a offerings without the regulatory burden of a public offering.
In recent months, many securities firms had launched their own 144a platforms, including Goldman Sachs’ (GS.N) GSTrUE and OPUS-5, started by a group of five banks including Citigroup Inc (C.N), Merrill Lynch MER.N and Lehman Brothers Holdings Inc LEH.N.
Nasdaq launched its own portal market earlier this year to trade these private placements of stock.
Nasdaq data show the private-placement market reached $162 billion last year, outpacing the $154 billion value of overall U.S. public offerings.
Arch rival NYSE Euronext NYX.N, which operates the New York Stock Exchange, is also mulling over the private placement business, but has no plans to enter it, an executive told Reuters earlier.
Nasdaq’s combined 144a market, which will be called the Portal Alliance and is expected to become operational in the first quarter of 2008, will attract both domestic and foreign companies interested in seeking U.S. capital, Greifeld said.
Companies that initially list on the unregistered securities market may become candidates for an eventual initial public offering, allowing Nasdaq to cultivate its listings business.
“We certainly see the 144a Portal Alliance as being a feeder market into the main market,” Greifeld said.
Bank of America (BAC.N), Bear Stearns BSC.N, Citigroup, Credit Suisse CSGN.VX, Deutsche Bank (DBKGn.DE), Goldman Sachs, JPMorgan (JPM.N), Lehman Brothers, Merrill Lynch, Morgan Stanley (MS.N), UBS UBSN.VX and Wachovia WB.N will join forces with Nasdaq’s market to form the Portal Alliance.
Editing by Lisa Von Ahn and Dave Zimmerman