It's been a while since BLOUIN ARTINFO took up the subject of the art exchange, where investors buy and sell shares of artworks on an open market. However, there is a new exchange in the works — an enterprise based in Luxembourg called SplitArt — which was featured in the Deloitte Luxembourg-ArtTactic 2011 art market report (previously discussed in relation to SWAG, the latest bundled cultural commodity). According to an interview with founder and general manager Dror Chevion, the new exchange is in the process of being approved by regulators and could be the world's first regulated art exchange that securitizes artworks and sells shares to investors, lending it a certain legitimacy that other exchanges have yet to realize. But even if it gets approved by regulators, that doesn't mean it's a good investment idea.

Here's how it works, according to Chevion: When the owner of an artwork decides to sell, he gets in touch with a bank and Splitart, which then go through the process of securitizing it. The bank values the work and agrees on a price range with the owner. There is a period of "blind bidding" for shares of the work. The lowest bidder sets the price for the shares — provided that price meets the minimum per share that the owner of the artwork initially set — and everyone who placed a bid pays that price for shares. Then trading begins, like any other financial exchange.

Why would anyone want to do this? As far as selling an artwork goes, it's pretty simple — it's just another way to get liquid value out of a piece of art that you own without taking it to auction. Theoretically, that could be less risky, since myriad smaller shares are sold to investors rather than waiting for one buyer to bid a price higher than the stated minimum at auction. However, that is not to say that many people bidding on share prices for a work are guaranteed to meet the seller's minimum sale price. A work could go unsold on an exchange and get "burned," just as well as it could get burned at auction.

But what about buying a work? In the interview Chevion told ArtTactic that "one of the most alluring aspects of using Art Certificates [what SplitArt is calling shares] as liquid, transparent financial instruments is that neither buyers nor sellers need to buy or sell a whole work of art."

The downside of that, of course, is that you don't actually own the work of art, so the aesthetic pleasure of owning a painting or sculpture — which offsets the risk inherent in buying art for many collectors — isn't there. Buying a share in an art exchange has nothing to do with the art itself, but rather has to do with betting the work will grow in value — which is an extremely risky bet unless you are just speculating based on the "greater fool theory" that even if you overpaid, a greater fool will come along and pay a higher price. You can't take the work home with you unless you buy 100 percent of the shares, and you can't force shareholders to sell on the SplitArt system unless you are in possession of 80 percent of shares of a work.

This isn't the first time that there has been a much-publicized launch of an art exchange in Europe. Last January there was much hoopla surrounding Art Exchange, a Paris-based exchange that promised to sell shares of work by Francesco Vezzoli and Sol LeWitt for as little as €10 ($13) per share. There has been little follow-up since it's launch — shares are still listed at €10 and the Web site doesn't appear to have been updated since March 2011. However, founder Pierre Naquin assured BLOUIN ARTINFO that Art Exchange is indeed up and running. "People can and are buying shares," he said, adding, "We are in the process of signing distribution deals with financial institutions which will enlarge our client base."

The problem with Art Exchange and other exchanges that currently securitize artworks (which are mostly based in China) is that they are not under the umbrella of any regulatory authority. Caroline Matthews, the operating manager of Art Exchange's parent company, A&F Markets, told CNNInternational last year that "at present there is no official authority for this sort of trading. We are obviously regulated in the sense that we are subjected to property laws, especially those regarding artworks."

But without regulation, shares can spike 1,700 percent (as they did in the Tianjin exchange in China last March) before anyone begins to think that the stated value of the outstanding shares is vastly more than the value of the underlying artwork and everyone starts to dump their shares, leading to panic. The Tianjin exchange had to halt trading to keep from a total market collapse.

If there is hope for SplitArt, it will be in the confidence given to investors by the backing of a regulatory authority. However, no announcements have been formally made about regulators, and SplitArt declined to comment to BLOUIN ARTINFO at this time. Is this exchange to be taken seriously? We will have to wait and see.