Institutions First for Private Derivatives
Javier Avalos, co-founder and CEO of Caplight, on building synthetic derivatives of private stock
Starting with institutions is really a way to keep the first version of private stock derivatives inside the part of the market that already has analysts, pricing inputs, and legal infrastructure. In Caplight’s market, a buyer is not just guessing where a company might be worth one day. They need a view on current fundamentals and a view on current spot price, because the derivative sits on top of an already thin and hard to price underlying market. That makes information gaps more dangerous than in plain spot secondaries.
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Caplight’s own workflow shows why this matters. Early trades were manually auctioned to roughly 25 participants over days to discover a fair option price, because even when the share price has some signals, the derivative price does not. Institutions are the buyers most able to do that work consistently.
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This fits the market’s structure. Private stock still trades through brokers, tenders, and negotiated blocks, with settlement often taking weeks or months and price signals scattered across platforms. Caplight’s synthetic contracts are meant to remove settlement friction, but they still depend on credible pricing of the underlying stock.
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Retail access tends to appear first in simpler wrappers. EquityZen built around smaller accredited investors by standardizing transactions and putting issuers at the table, while also arguing that more transparency and standardization need to come before more complex derivative style products. That is the same sequencing logic in a different package.
Over time, the market is heading toward broader access, but only after research, data, and execution standards catch up. The likely path is institutions first, then more standardized secondary trading, then simpler retail products, and only after that a true retail derivatives layer on private companies.