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So to save themselves from all such troubles, the companies hit the private exchanges since stocks of bonds not registered with SEC (under Rule 144A) can trade on private exchanges. Many private equity firms and hedge funds, which want to raise money but are reluctant to be lot more open to public, prefer to be listed on private exchanges.

Though the amount of money a firm can garner is to some extent less on private exchange compared to public exchange primarily because the demand is much more on a public exchange. There is a growing criticism of private exchanges for the reason that they exclude individual investors from a growing proportion of financial market activity. Even the mutual funds that are main investment tools for individual investors are allowed to trade in small number of unregistered securities, thereby, further alienating individual investors from market participation.

However, still the idea that private exchanges might completely overtake public exchanges seems far fetched, but its evident that they are going to snatch away a large chunk of their business. It would be interesting to watch this battle.

Concluded.

* Contributed by: -
Vijay Singh Poonia,
PGDM 2007-09,
IIM Calcutta,
Has work experience of 3 years with Indian Oil Corp Ltd.