News & Analysis

Private exchanges to consolidate

NASDAQ is consolidating Goldman Sachs' GSTrUE, Bear Stearns’ Best Markets, and OPUS-5, all private exchanges, which allow private equity firms to list with less disclosure requirements.

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Wall Street's investment banks are working with NASDAQ to create a single private exchange for qualified institutional buyers.

For private equity firms, the exchanges present a means of raising permanent capital without the disclosure requirements of listing on a public exchange.

Bear Stearns, JPMorgan, Deutsche Bank, Goldman Sachs and Wachovia Securities are all signed up to the project. So too are the backers of private exchange OPUS-5: Citi, Lehman Brothers, Merrill Lynch, Morgan Stanley, Credit Suisse, UBS and Bank of America. NASDAQ is calling the scheme the Portal Alliance.

Now all of the investment houses will consolidate their exchanges with NASDAQ’s Portal system, which the stock exchange moved to an electronic platform this year. The Portal Alliance is expected to launch in the first quarter of 2008.

The move will create a market with greater liquidity and better valuations, said NASDAQ’s chief marketing officer, John Jacobs.

“If you’re a qualified institutional buyer, you’re not going to have to sign up for multiple systems,” Jacobs said. “If you’re an issuer, you no longer have to pick one system.”

The investment firms will own part of the equity of the private exchange and participate in its governance. Their most important role will be providing aftermarket trading for listed shares.

Oaktree Capital Management and Apollo Management Group both listed on the GSTrUE this year. When the new market launches, their shares will be migrated into the new market.