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Wall Street wants to disrupt private share trading

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Wall Street firms such as Goldman Sachs, JPMorgan and Morgan Stanley are muscling in on the booming market for private share trading – and potentially disrupting existing technology platforms.

The growth in private markets in recent years has been dramatic, led by an increase in the number of unlisted companies that are valued at over $1 billion – the so-called unicorns. There were 963 unicorns worldwide in January 2022, with a value of $3.14 trillion, according to a list maintained by research firm CB Insights.

This creates a substantial revenue opportunity for firms that can tap into the market for secondary trading of shares in unlisted private companies.

‘‘What we typically see in the secondary market is that 1% to 2% of the total dollar value of the unicorns transacts in any given year,” says Andrew Tuthill, global head of equities private markets at JPMorgan.

That suggests that there is around $60 billion of annual deal flow to target and the eye watering fees charged on many secondary private share trades indicates that there is both a hefty profit on offer and an opportunity to win market share by charging a less extortionate levy on deals.

The boutique brokers and specialist trading platforms that have sprung up to offer secondary liquidity in private company shares – typically equity in US technology companies based in or near Silicon Valley – often charge 5% or 6% for each side of a trade, for a total of as much as 12% of the value of a deal.

Many

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Jon Macaskill is one of the leading capital markets and derivatives journalists, with over 20 years’ experience covering financial markets from London and New York. Most recently he worked at one of the biggest global investment banks
Jon Macaskill
Jon Macaskill is a leading financial journalist with more than 25 years’ experience covering banking and markets from London and New York. He was named Best Editorial Commentator in 2016 State Street Institutional Press Awards for his monthly column in Euromoney
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