Reinventing [financial] Markets
J. Doyne Farmer, Santa Fe Institute
Duncan Niederauer, NYSE Euronext
Barry E. Silbert, SecondMarket
Moderator: Justin Fox, Harvard Business Review
What is wrong about financial markets today ?
trust has been destroyed Nothing new is being created other than products the public markets are closed to companies below a certain size We really do not understand how to predict and prevent a collapse We need a private enterprise solution Cost of running a company has been allowed to run amock and that is suffocating the smaller companies. The job creation engine will kick into gear when we enable the smaller companies to get access to the public markets. No solutions in the financial reform bill except for a 20 page section of an office of financial research
10-11 years ago, retail brokers, decimilization and other developments and programmed trading means that we have turned an investing market into a trading market.
The margin is so low that it is tougher to maintain orderly markets. The traditional market makers played an important role to maintain orderly liquidity.
Some of the rules are trying to help the market can reinforce and accelerate a collapse. Forced sales in a falling market because of liquidity and other rules.
Markets are setting societies goals. Suggestion of finding a way to slow it down to get to investing market, but then the innovation goes to the unregulated world.
Barry Silbert is talking about second market and his approach of making a market that helps make a market for smaller companies.
SecondMarket is the largest centralized marketplace and auction platform for illiquid assets, such as asset-backed securities, auction-rate securities, bankruptcy claims, collateralized debt obligations, limited partnership interests, private company stock, residential and commercial mortgage-backed securities, restricted securities and block trades in public companies and whole loans. SecondMarket’s online auction platform has over 10,000 participants, including global financial institutions, hedge funds, private equity firms, mutual funds, corporations and other institutional and accredited investors that collectively manage over $1 trillion in assets available for investment.
Our hybrid transaction model harnesses the power of technology and experienced sales and trading professionals to bring a unique, effective solution to creating liquidity in illiquid markets. Our online trading platform not only provides a centralized location to bring buyers and sellers together and provide transparency, but it also enables us to offer a variety of auction formats, including English auctions, Dutch auctions, sealed bid auctions, reverse auctions, and SecondMarket’s patent-pending ManhattanAuctions. Further, our trading platform utilizes a proprietary matching algorithm to pair buyers and sellers. Our advanced technology is enhanced by our teams of specialists that support each market. They provide the high-touch experience necessary to guide and educate buyers and sellers to ensure that trades get done.
SecondMarket facilitates all administrative and settlement support services for executing both private and public transactions involving illiquid assets. We have the expertise to handle even the most complex transactions efficiently. Our team manages the entire process, from pre-sale due diligence through execution and settlement, to ensure regulatory compliance and the most efficient settlement possible.
How do we bring retail liquidity to infrastructure project finance ?
Some smaller things like Lending club, and other structures.
Need to provide information on the projects for investors globally and produce markets.
How do we protect people from themselves?
Currently there is the accredited investor standard. Need more financial literacy. There is a need for a credit test.
Discussed toban taxes and the likely effect of hollowing out your local markets. But then the transaction taxes end up being passed through to the individuals.