The next finance: socially responsible trading networks and their alternative trading systems

From an article by Hazel Henderson:

“When the collapse came, some like-minded investors and traders had already begun to build new exchanges from the bottom up. An underlying infrastructure already existed in the form of alternative trading systems (ATS). ATS are electronic markets such as Instinet and Archipelago, regulated by the SEC, that broker financial products outside traditional stock exchanges. The socially responsible trading networks, which use the ATS infrastructure as a platform, are new marketplaces where investors and companies can meet. They screen for ESG criteria, and they attract primarily nonspeculative long-term investment.

One such new marketplace is Entrex, an “entrepreneurial exchange” based in Chicago and focused on companies with less than US$250 million in annual revenue. Another private liquidity network, called Wall Street Without Walls, links credit unions and community development financial institutions to companies. Three electronic peer-to-peer lending sites — Prosper Loan Marketplace in the U.S.; Zopa in the U.K., U.S., Japan, and Italy; and Qifang in China — as well as hundreds for microlending (including MicroPlace, Kiva, Accion, and Women’s World Banking), are filling a huge need worldwide. An index of private green companies in Brazil is now in the planning stage with Entrex and the green broker-dealer Iowa Progressive Asset Management.

Consider the cultural DNA of exchanges founded along these lines. They are as robust as Wall Street in their back-office efficiency and their clearing and settlement provisions, but they have far less overhead. They trade in small and midsized enterprises: the 400,000 companies that provide most of the jobs in the United States. These companies are generally privately held; they tend to be unattractive to short sellers and market manipulators and leery of venture capital and private equity. Many have no interest in making an initial public offering on Wall Street.

These new marketplaces are less regulated than the public markets. Investors are protected by the screening, the enhanced transparency, and the disclosure requirements that constitute the wall of the garden. The networks work because the people inside the gates can trust one another. Corporate books are kept open and collectively scrutinized, and the emphasis on socially responsible investing makes it more likely that these companies will do well.”

2 Comments The next finance: socially responsible trading networks and their alternative trading systems

  1. AvatarMichael Van Patten

    To comment on the above and make a slight correction, Wall Street Without Walls and Entrex are not socially responsible trading platforms or broker dealers, they are service providers helping CDFI’s (WSWW) and private companies (Entrex) raise capital by structuring more effective transactions that can be resold by Broker Dealers (in the case of Entrex). There are many efforts around the world that are focusing on either the socially responsible or environmental markets, however none are ATS’, which is a classification provided by the SEC and regulated by FINRA (you must be a broker dealer to be an ATS). The only social and environmental transactions system and marketplace that exists (launching in mid February) that will be regulated as a broker dealer and an ATS is Mission Markets,

    Through its centralized electronic transactions and communications platform, Mission Markets will be supporting both capital raising and secondary trading or liquidity transactions for sectors and asset classes such as, ecosystem services, sustainable fisheries, carbon markets, CDFIs, Slow Money Movement, environmental credits, intrastate stock offerings, private debt and equity transfers, Farm COOP Shares, and fisheries Catch Shares.

    By connecting both buyers and sellers of these products, providing portfolio management tools, metrics and data, Mission Markets hopes to effectively scale impact investing and help make it a viable asset class.

  2. Hazel HendersonHazel Henderson

    Hi Mike van Patten : As one of your former colleagues , I understand why you wanted to add a ” correction” ,so as to let people know what you are planning for the launch of your firm . But there is no need to imply that other firms are not full-service ,socially-responsible ,ATS and /or broker dealers , since many that I mention are already facilitating many
    ” green” and socially-responsible investments . I know, because I am such a socially-responsible ” green” investor with them ! I regret that, from all the private investors I introduced to you,it has been difficult to raise the funds for your original launch planned for January 2008. Your new website looks very nice , although I still ask you to remember my advice : not to rely so much on carbon trading and similar markets. I have always opposed them as socially-irresponsible and you now see the backlash to carbon trading , as creating just one more Wall Street ” bubble” without removing any carbon from the air. NGOs around the world have now blown the whilstle ( see The Story of Cap and Trade at We at EthicalMarkets Media (USA and Brazil) wish you well for the New Year.

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