Nasdaq to launch electronic 144A securities market

Nasdaq to launch electronic 144A securities market

US stock market operator Nasdaq says it has received regulatory approval for its new electronic trading platform for unregistered securities.

Nasdaq says the US Securities and Exchange Commission (SEC) has approved its electronic 144A market, which is named after the SEC rule that deals with private placements of stock.

The fully automated Web-based application, which is an extension of its Portal application, will enable qualified institutional investors to trade stocks in companies that are not yet public.

Under SEC rules, companies can sell securities without registering them as long as issues are limited to qualified investors with at least $100 million in assets and there are no more than 499 stockholders.

Nasdaq executive vice president, John Jacobs, says: "This centralized automated platform will bring added liquidity and transparency to the 144A market and is a natural progression for Nasdaq."

The US exchange says it will launch the centralised trading and negotiation system for 144A equity securities in August and will phase in debt securities in the fourth quarter.

Nasdaq says the private placement market has grown substantially in the last five years and it estimates that the amount of equity and debt capital raised using Rule 144A has grown three-fold since 2002 and exceeded $1 trillion in 2006.

Last month a group of investment banks including Citigroup, Lehman Brothers Merrill Lynch and Morgan Stanley were reported to be developing an electronic trading platform for unregistered securities.

The system will compete with private trading platforms operated by Goldman Sachd and JPMorgan Chase. Earlier in the month Goldman signed up hedge fund group Oaktree Capital and private equity firm Apollo Management to sell unregistered shares through its GSTRuE private e-trading system. Apollo also agreed to trade its shares on a similar platform established by JPMorgan Chase.

The group of banks is thougtht to be developing the 144A system to ensure that Goldman, JPMorgan or others do not come to dominate the electronic market for unregistered shares.

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