Private asset trading platform iSTOX is set to go fully live after receiving approval from the Monetary Authority of Singapore (MAS) as a recognised market operator and a capital markets services licensee.
This allows it to accept more investors as well as issuers, including unlisted companies.
The company was part of MAS’s FinTech Regulatory Sandbox since May 2019. The “sandbox” allows fintech firms to experiment with products without uncertainty over regulatory requirements. Regulators, however, set limits on fintech companies’ activities in order to cap systemic risk.
In addition to creating a secondary market for equity in unlisted companies, iSTOX can offer trading in shares of private funds – such as private equity and venture capital – which typically have years-long lockup periods, Choo Oi Yee, iSTOX’s chief commercial officer, said at a media briefing on Monday.
She added that property funds, infrastructure funds, and debt issuance – such as project finance – could all be traded on the platform.
For now, the platform’s pipeline includes a feeder fund of hedge funds, and a variable capital company (VCC). Choo acknowledged that equity of unlisted companies may take longer to add as it would require providing potential investors with more information.
iSTOX indicated it would seek input from unlisted companies, such as their last audit, to provide potential investors with more information before allowing trading of their securities.
The iSTOX platform only allows access to accredited investors. In Singapore, this refers to an individual earning S$300,000 a year or with more than S$2 million in net assets, or companies with more than S$10 million in assets or certain trustees.
But Choo noted that the iSTOX platform will allow accredited investors who may not meet the capital requirements of funds and private banks – such as those who may want to invest as little as S$50,000 – to acquire private assets.
Tay Hwee Ling, disruptive events assurance leader at Deloitte Southeast Asia and Singapore, said that private exchanges such as iSTOX’s could offer a good option for companies not yet ready for IPOs to raise funds and for minority investors to exit.
“That said, regulated private exchanges are still new in the Singapore capital market,” she said in comments emailed to DealStreetAsia Tuesday. “Companies are likely to adopt the iSTOX platform when there are more proven successes in the market. Meanwhile, most might still adopt a wait-and-see approach in the short-term.”
Deloitte has a tie-up with iSTOX’s operator ICHX Tech.
iSTOX is not the only Singapore-based platform offering investors a chance at buying non-public assets, such as equity in unlisted companies. Platforms such as Fundnel and CapBridge also offer similar products.
In an indication of potential market demand for opportunities to invest in unlisted equity, Fundnel’s website says it has had deals valued at more than $1.8 billion, with 36 transactions completed since 2015. The site indicates it completed a deal for secondary equity in ride-hailing giant Grab, but the company said it was unable to provide details on the deal to protect client confidentiality.
Unlike iSTOX and Fundnel, CapBridge says it allows retail investors onto its platform.
iSTOX uses blockchain technology to allow the trading of digital securities – or securities that represent an underlying asset or activity. Its new regulatory approval will allow it to issue digital securities, hold them as a custodian, and facilitate a secondary market for buying and selling. A lack of intermediaries means transactions are immediate, rather than requiring days-long settlement periods, the company said.
The blockchain technology will also enable keeping a ledger for the payment of debt coupons or other dividends, the company said.
The platform raised $5 million from South Korea-based asset management company Hanwha Asset Management in January, a couple of months after landing $5 million from Japan-based Tokai Tokyo Financial Holdings.
In September 2019, iSTOX raised its Series A funding round led by Thailand’s Kiatnakin Phatra Financial Group. Other shareholders include Singapore Exchange (SGX) and Heliconia Capital, a Temasek Holdings subsidiary.
Editor’s Note: Fundnel has clarified that it does not allow retail investors to use its site. This article has been updated to reflect the change.