A group of investment banks including Citigroup, Lehman Brothers Merrill Lynch and Morgan Stanley are developing an electronic trading platform for unregistered securities that will compete with existing systems, such as the one operated by Goldman Sachs, according to a Financial Times report.
Earlier this month Goldman signed up hedge fund group Oaktree Capital and private equity firm Apollo Management to sell unregistered shares - known as 144A transactions - through its GSTRuE private e-trading system, which is only open to institutional investors. Apollo has also agreed to trade its shares on a similar platform established by JPMorgan Chase.
Unregistered shares are set to become a popular way for alternative asset managers to raise capital without having to comply with the disclosure regulations involved in an initial public offering (IPO), says the report.
Issuers can have up to 499 shareholders before having to register with the Securities and Exchange Commission (SEC).
The FT report, which cites people close to the matter, says the group of banks are developing the system to make sure that Goldman, JPMorgan or others do not come to dominate the electronic market for unregistered shares.
The group is expected to include a further partner - such as a technology vendor or transfer firm - to handle trade processing.
The new platform is set to launch in September, says the report.