Investment bank Rodman & Renshaw has launched a platform that allows issuers and investors to interact and trade with each other directly if they choose, eliminating intermediaries like brokers dealers, dark pools and syndicate bankers.
The platform, DirectMarkets, allows issuers to either privately sell shares directly to institutional investors or to buy back shares, saving both the issuer and buyside money.
Under the system, issuers are also permitted to make public transactions if they choose, according to Kevin Lupowitz, chief executive of DirectMarkets.
"We offer the ability to do ‘at the market’ transactions that will gradually sell primary shares into the secondary market through traditional electronic trading strategies," Lupowitz said. "The nature of the transaction determines the price and terms of the deal, and whether it is immediately reported or not."
The goal is to create liquidity for investors and larger sized blocks. Rather than using block trading venues, institutions can send orders directly to the issuer for larger blocks than may be available in the secondary market.
"The net results are that the proceeds of the sale go right to the company and the institutional customer can get a large block without it adversely affecting its own cost basis," Lupowitz said.
Issuers pay a subscription fee to be a part of the platform and Rodman & Renshaw charges users a trading fee, normally between 1 to 2 cents a share for any trades executed.
"On a typical $100 million deal, that could be the difference of $5 million for traditional investment banking fees versus $200,000 for trading and subscription fees," Lupowitz said.
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