Online exchange starts for private firms, syndicates

MyFarm's 300 investors can buy and sell units on the exchange. Photo / NZME.

A new online exchange aims to help investors who own shares in private companies or units in property, farm or forestry syndicates to trade them more easily.

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

MyFarm's 300 investors can 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 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.

Jenkins said Syndex hoped to provide a marketplace for investors to buy, manage and sell their assets at 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 the 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 300 to 400 syndicates in New Zealand and that number was growing.

The exchange has until December 1 to get a licence or an exemption from the Financial Markets Authority.

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

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 Syndex 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.

Brent Sheather, an authorised financial adviser, 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 such as 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.

Syndex

• New online exchange.
• Enables people who own shares in private companies or units in property, farm or forestry syndicates to trade them more easily.
• Matches sellers and buyers anonymously and once a deal is reached puts them in touch with each other.