New trading platform for part-owners

Mike Jenkins, managing director of Syndex, wants to makes it easier for owners of shares in private companies and syndicate units to trade them.

Investors who own shares in private companies or units in property, farm or forrestry syndicates could soon be able to trade them more easily through a new online exchange.

Syndex, a company set up by four Kiwis with backgrounds in rural business, equity markets, trading and property has gone live with farm syndicator MyFarm the first to sign up to the exchange.

MyFarm's 300 investors can now buy and sell units on the exchange.

Syndex managing director Mike Jenkins said he was also in talks with commercial property syndicates to get them on board.

Syndicates and private assets can produce higher returns than other investments but are are typically illiquid assets meaning it can be hard to sell them if an investor wants to get their money out.

Unlike publicly listed companies it can take time to find a buyer or seller and there may be no one place for investors to look for that buyer or seller.

Jenkins said it hoped to provide a marketplace for investors to buy, manage and sell their assets as a price and time that suited them.

"Syndex provides investors with real time flows of information and greater transparency and visibility of all their investments on the one platform, at any time and any place, helping them to liquidate their positions and research where best to place their investment dollar."

Jenkins said it intended to charge syndicators an annual fee of $2500 per syndicate on the platform.

While individuals wanting to trade would pay a flat $60 annual fee once they began trading.

Jenkins said the fees were being kept low so its focus was on volume - getting large numbers of syndicates and investors to sign up.

The platform aims to match up sellers and buyers anonymously and then once a deal is reached put them in touch with each other.

The exchange would not handle any money transactions to begin with but hoped to introduce automated settlement later on.

Jenkins said there were around 300 to 400 syndicates in New Zealand and that number was growing.

The exchange does not currently have to be licensed under the Financial Markets Conduct Act but has until December 1 to get a license or an exemption from the Financial Markets Authority.

It's a world market. It is definitely a global play.

Mike Jenkins

Jenkins said it was in talks with the FMA and intended to get a license.

From December licensed exchanges will be subject to a suite of investor protection mechanisms such as continuous disclosure and legislative requirements around insider trading.

Jenkins said it was also considering linking up with crowd-funding sites which help companies to raise equity to allow people who buy into a business to be able to trade those shares.

Crowd-funding only became possible in New Zealand last year and so far there are no secondary markets set up although a number of the crowd-funders have talked about doing so.

Jenkins said it wanted to form partnerships with crowd-funders rather than competing with them and was looking at tapping into the secondary market for crowd-funding on a global scale.

"It's a world market. It is definitely a global play."

Brent Sheather, an authorised financial adviser, said superficially it was a good idea to have a secondary market for buying and selling units.

"If a person is locked in and it offers a way to get out, superficially it's good," Sheather said.

But the risk was that the buyer or seller did not get a fair price.

Sheather said the key to its success would be price discovery - what was used to determine the right price for a particular investment.

On a secondary market like the New Zealand stock exchange it was often institutional investors that helped to set the price.

"In this case it will mainly be done by individuals and may not be very reliable."

A spokeswoman for the Financial Markets Authority said as with all investments it was important for investors to understand their tolerance for risk and the particular risks associated with a financial product.

"We encourage investors to seek professional financial advice to help them consider whether an investment is appropriate for their own circumstances."