What factors generate a healthy secondary market in securities?  That is my question for this week.  I have found myself struggling with this question since I was first called by a reporter writing a story for The Wall Street Journal about a work-in-process written by one of our colleagues, Seth Oranburg (a Visiting Assistant Professor at Chicago-Kent College of Law).  The article came out yesterday (and I was quoted in it–glory be!), but the puzzle remains . . . .

Secondary securities markets have been hot topics for a while now. I followed with interest Usha Rodrigues’s work on this paper, for example, which came out in 2013.  Yet, that project focused on markets involving only accredited investors.  

Seth’s idea, however, is intended to prime a different kind of secondary market in securities: a trading platform for securities bought by the average Joe (or Joan!) non-accredited investor in a crowdfunded offering (specifically, an offering conducted under the CROWDFUND Act, Title III of the JOBS Act).  [Note: I will not bother to unpack the statutory acronyms used in that last parenthetical expression, since I know most of our readers understand them well.  But please comment below or message me if you need help on that.]  Leaving aside one’s view of the need for or desirability of a secondary market for securities acquired through crowdfunding  (which depends, at least to some extent, on the type of issuer, investment instrument, and investor involved in the crowdfunding), the idea of fostering a secondary securities market is intriguing.  What, other than willing buyers and sellers and a facilitating (or at least non-hostile) regulatory environment, makes a trading market in securities?