America’s private equity market is set to triple to $30 trillion by 2030 (source: Forbes), yet less than 1% of the nation’s 27 million mostly private companies currently trade shares on a regulated alternative trading system (ATS).
But that will undergo seismic change as the private market outgrows the long-established public market, according to Joel Steinmetz, Chief Operating Officer at the innovative Rialto Markets broker dealership.
“We’re not there yet,” he said. “But it’s no longer about wondering if the democratization of share dealing will happen but predicting when – and it will be big.”
With decades of experience on Wall Street, he can offer his own ‘Steinmetz scale’ for innovations that changes the industry witnessed during a career of building trading platforms and algorithmic systems at Citi, Citadel, Instinet and Liquidnet.
Joel Steinmetz – Rialto Markets COO
“I rate algorithmic and high-frequency trading as an eight on a scale of 10, with ETFs (exchange-traded funds) at a similar ranking,” said Steinmetz.
“And while democratization of the private markets might be a ‘four’ now, it will certainly rate the same or exceed those two pivotal developments – in as little as five years.
“Private investors have jolted awake to the market possibilities. We’ve already seen the power of the masses in the public securities sector through incidents like the ‘Gamestop Affair’ where retail investors, aided by social media, challenged the public market status quo.
“Indeed, Gamestop may later be viewed as the moment leading to every American becoming an investor in some way, using as little as 10 dollars and/or joining a ‘moms and pops’ syndicate, and becoming a serious influence on corporate America.”
Steinmetz also predicted that the public market would adopt digitisation and digital securities and embrace blockchain:
“I believe the SEC (Securities & Exchange Commission) will police this ‘new frontier’, with new Chairman Gary Gensler being both tough and positive in working with market participants to make things work.
“But many others are slower to embrace the fast-changing market and the need to deploy tools from both the traditional markets and new technology. That’s why we – a group of seasoned Wall Street professionals – formed Rialto Markets in 2016.
“We’ve since invested more than two years gaining SEC and FINRA (Financial Industry Regulatory Authority) regulation for our MarketBoard secondary market ATS (automatic trading system) for private company share trading.”
“It means we are well-placed to help companies access capital, as many directors are unaware of crowdfunding’s full potential whether using Regulation CF or Regulation A+ and to enable investors to maximise new opportunities.
“We’ve also seen some companies raise $5 million through Regulation CF and then go directly to an institutional Regulation D round, which highlights how quickly things are evolving.
“Others are choosing to go straight to Regulation A+, giving them the chance to raise $75 million a year and stay private for longer, while a secondary trading ATS helps these companies and their shareholders deliver early liquidity and value.
“We’re here to guide both issuers and investors towards accessible, democratized and less risk-averse trading.”
Steinmetz admits this new era excites him as much as when, as a law student, he made a chance visit to the New York Mercantile Exchange.
“I was amazed by the number of people working – more than in today’s electronically enhanced times – and what was being traded, not just gold, silver and goods you would expect, but even things like orange juice.
“And there was so much energy, pace, and excitement. I loved it and realised it was what I wanted to do. That ‘theatre’ still happens, but there are fewer people, pad and pen have gone, and automation means most action now happens ‘upstairs’, but I still feel the excitement – it’s just a little different.”