Officials in Delaware and its largest local govenrment -- New Castle County, where most Delawareans live -- were beyond enthusiastic on July 28 after county council agreed to authorize up to $15 million in revenue bonds to help a group of prominent ex-Wall Streeters (with Washington connections) build the Delaware Board of Trade -- DBOT -- a new securities market, in Wilmington.
DBOT says its organizers include former NYSE CEO Richard Grasso, former UBS Financial Services CEO Joseph Grano, former Philadelphia Stock Exchange chairman John Wallace, former Cincinnati Stock Exchange CEO Richard "Nick" Niehoff, and Denis Toner, a former aide to Vice President Biden who also served on the U.S. Postal Service board.
DBOT is designed to exploit the JOBS Act, a 2012 law passed by Congress (with particular support from U.S. Sen. Tom Carper, D-Del., more here) that allows small businesses that lack full Securities and Exchange Commission IPO approvals to raise up to $50 million from investors (the old limit was $5 million).
DBOT organizers plan a "venture exchange," a sort of high-end crowdfunding, to speed those capital infusions. County administrator David Grimaldi assures me the DBOT, not county taxpayers, will be on the hook to repay PBOT bonds (if they are issued).
Hasn't the nation gotten away from regional stock markets? The last of the local exchanges that once flourished -- in Philadelphia, San Francisco, Chicago, Boston -- mostly folded in the early 2000s into national markets (Nasdaq, the New York Stock Exchange). Physical stock and option trading, even on the once-frantic New York floor, is a shadow of what it was back in 2001, when Philadelphia's basement Market St. trading floor bustled with more than 1,000 equity and options traders, many of them relocated after the attack on the World Trade Center. Traders have since "moved upstairs" and online, taking the bright-jacketed floor specialists and market-makers with them.
But there's been a corresponding boom in electronic markets. DBOT hopes to cash in. Its bond proposal won unanimous approval from the elected council after it was proposed by elected County Executive Tom Gordon, and introduced by Council President Christopher Bullock and Councilman Penrose Hollins, who represents Wilmington.
"This project may be the biggest thing to happen to Delaware since the Banking Act," said Gordon, referring to the 1981 state law that made Delaware a credit card and wholesale lending center. "Our State will not only be the best choice to incorporate a new business, but also to raise the money necessary to fund it," Gordon added.