The U.S. Capital Markets Clearance And Settlement Process
Within the world of securities there are many sectors and facets to explore and understand. To be successful, a public company must have an active, liquid trading market. Accordingly, the trading markets themselves, including the settlement and clearing process in the US markets, is an important fundamental area of knowledge that every public company, potential public company, and advisor needs to comprehend. A basic understanding of the trading markets will help drive relationships with transfer agents, market makers, broker-dealers and financial public relations firms as well as provide the knowledge to improve relationships with shareholders. In addition, small pooled funds such as venture and hedge funds and family offices that invest in public markets will benefit from an understanding of the process.
This blog provides a historical foundation and summary of the clearance and settlement processes for US equities markets. In a future blog, I will drill down into specific trading, including short selling.
History and Background
The Paperwork Crisis
The NASDAQ Private Market
On Wednesday, March 6, 2013, NASDAQ surprised the small-cap and investment community when it announced it is acquiring Sharepost’s private company market place (PCMP) exchange and rebranding it. On March 5, 2014, NASDAQ officially launched the NASDAQ Private Market (“NPM”) a new marketplace for private companies. A PCMP is a trading platform, such as SharePost or SecondMarket, that provides a marketplace for illiquid restricted securities, such as private company securities, 144 stock, debt instruments, warrants, and the like or alternative assets. It is on a PCMP that pre-IPO Facebook, Groupon and LinkedIn received their trading start.
The official NASDAQ press release announcing the launch of the NPM states that the NPM will “provide qualifying private companies the tools and resources to efficiently
NASDAQ To Acquire Sharepost And Create The NASDAQ Private Exchange
NASDAQ acquires Sharepost
On Wednesday March 6, 2013, NASDAQ surprised the small cap and investment community when it announced it is acquiring Sharepost’s private company market place (PCMP) exchange and rebranding it the Nasdaq Private Exchange.
In December, 2011, I wrote a few blogs on PCMPs. A PCMP is a trading platform, such as SharePost or SecondMarket that provides a market place for illiquid restricted securities, such as private company securities, 144 stock, debt instruments, warrants, and the like or alternative assets. It is on a PCMP that pre-IPO Facebook, Groupon and LInkedin received their trading start. Following the IPO of these large entities, and in particular Facebook, traffic and use of PCMP sites declines, but NASDAQ clearly believes the decline is temporary, and I agree.
Private Company Market Places
Each PCMP offers a fully automated back office, documentation, escrow, transfer and settlement support. Users open trading accounts, like they would with any other broker dealer. The PCMP provider collects
