"The whole concept of secondary trading is not new, it just used to happen in back alleys. If it's done in an organized way, it's better." That's what Barry Silbert, CEO and head of SecondMarket, said at a recent conference. And that's hard to argue with.

The fact is that secondary transactions have long been an option for employees and outside investors in private companies. There have been times in the past when active secondary market trading has forced an IPO. Microsoft is a great example of that. But by creating a market that that has made such transactions much easier to consummate, secondary trading can present some issues for issuers as well as their venture capitalists and investment bankers.

Twitter CEO Dick Costolo, according to Fortune, is not a fan of the market. He notes that such trading can be a big distraction for employees. In addition, "you worry about people who might be buying through those secondary markets ...  what they've been told by the person who might be trying to sell them the stock, and who's going to get in trouble at the end of the day if it doesn't all work out with them."

He has imposed restrictions on trading by his employees. Such VCs and bankers are applauding, even as SecondMarket builds in more safeguards. They certainly want to maintain tight control over valuations and in some cases that might be tricky if the secondary market doesn't agree with them. SecondMarket indeed looms as a powerful alternative to the traditional VC-oriented investment and exit process, as companies can more autonomously acquire investment funds and allow investors to cash out.

 For more:
- here's the article

Related articles:
ETF settlement fails--what's the big deal?  
Hedge funds redux?