Wall Street firms Citi, Lehman Brothers, Merrill Lynch, Morgan Stanley and The Bank of New York Mellon are to jointly establish an electronic trading platform for unregistered securities.
The Open Platform for Unregistered Securities (Opus-5) will provide trade reservation, shareholder tracking and transfer management for privately offered equity trades - known as 144A securities after the SEC rule that deals with private placements of stock.
Bank of New York Mellon will act as administrator of the system, which "will promote liquidity and efficiency for qualified institutional buyers who trade 144A equity securities and enhance issuers' capital raising efforts". Additional securities firms are expected to participate in Opus-5 over time. The market is expected to launch in September.
Reports that a group of investment banks were clubbing together to launch a system for unregistered shares first surfaced last month. Citigroup, Lehman Brothers, Morgan Stanley and Merrill Lynch were rumoured to be launching a system to compete with private trading platforms operated by Goldman Sachs and JPMorgan Chase.
US stock market operator Nasdaq has also received regulatory approval to launch its own electronic 144A securities market. The Web-based application is an extension of Nasdaq's Portal application and will enable qualified institutional investors to trade stocks in companies that are not yet public.
US investment bank Bear Stearns has disclosed that it has launched its own electronic trading platform for unregistered securities in the US, called Best Markets.
The system is accessible only to "qualified institutional buyers" on a password protected Web site, says Bear Stearns.