You are here

Project Turquoise is Goldman's scheme to put markets in the dark

Section: Daily Dispatches

'Dark Pools' Emerge in Project Turquoise

By Norma Cohen and Anuj Gangahar
Financial Times, London
Thursday, May 24, 2007

Project Turquoise, the share trading system backed by a group of the world's largest investment banks, will allow transactions both on-exchange as well as in "dark liquidity" pools, where firms offer to buy and sell large blocks of shares away from public sight.

Speaking at an Exchange Forum conference in London, Phillip Hylander, co-head of European equities at Goldman Sachs, set out for the first time the broad outlines of the business model that has promised to bring more competition to European share trading.

"Turquoise is to be a hybrid that will incorporate a public order book and a non-public order book," Mr Hylander told the conference. "Turquoise will be an aggregator of 'dark pools.'"

Plans for Turquoise suggest that its backers are going beyond their initial aim of providing exchange-type services at lower prices than existing providers.

They are also seeking to cater for the large-lot sizes that banks will be allowed to fill internally from their own order books following new European rules, known as Mifid, which take effect in November.

Banks say that although exchanges have become efficient fulfillers of smaller orders, larger orders that may throw prices against the customer placing the order are harder to fill. ...

* * *

Goldman Leads Charge Toward Exclusive Stock Markets

From Reuters
via Yahoo News
Thursday, May 24, 2007;_...

NEW YORK -- Top IPO underwriter Goldman Sachs Group Inc. this week launched a platform allowing an exclusive club of big investors to trade unregistered, privately placed securities, in the latest challenge to U.S. equity markets.

Private placements have become a big deal on Wall Street, another alternative for companies that want to raise capital but don't want the regulatory and disclosure requirements that come with a public listing.

Goldman on Monday helped underwrite the private sale of 15 percent of hedge fund manager Oaktree Capital Management for $880 million. As part of that sale, Oaktree told investors they would be able to buy and sell Oaktree shares through the new Goldman Sachs Tradable Unregistered Equity system, or GSTRuE.

The new system comes two weeks after Nasdaq Stock Market Inc. CEO Bob Greifeld said the exchange operator expected to launch a similar private placement "portal" as early as next month.

Meanwhile Morgan Stanley and other broker dealers are planning similar systems to tap the demand among investors and companies for a more transparent and liquid private placement market.

Last year, according to Nasdaq, $162 billion of capital was raised through unregistered private placements compared with $154 billion through IPOs, which are registered with the Securities and Exchange Commission.

Goldman declined to comment on Oaktree or offer detail about its plans for GSTRuE.

"Today we'll see how the system works and then as it evolves, as it develops, we'll see what happens," spokesman Ed Canaday said on Thursday. "We've put a significant first stake in the ground."

Under SEC rules, companies can sell securities without registering them as long as issues are limited to qualified institutional buyers, investors with at least $100 million of assets, and there are no more than 499 stockholders.

GSTRuE is based on Goldman's RediPlus electronic trading system. Participants in the unregistered stock platform can view indicated bids and offers and last sale prices. Investors wanting buy or sell securities then must contact their broker to make a trade.

Goldman's spokesman added that the bank will monitor the market for private securities issued on its system, to ensure the number of investors stays below the 500 threshold. Goldman will also serve as a market maker to GSTRuE clients, committing capital to facilitate trades.

* * *

at the
World Gold, PGM, and Diamond Investment Conference
in Vancouver, British Columbia, Canada
Sunday and Monday, June 17 and 18, 2007

* * *

Help Keep GATA Going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at GATA is grateful for financial contributions, which are federally tax-deductible in the United States.