SAN FRANCISCO - Buyers signed up. Sellers signed up. But no deals have been done.

After the California government, facing a cash crunch, began issuing IOUs to some creditors July 2, SecondMarket Inc., a market platform for illiquid assets, opened a market for the California IOUs.

The state controller's office began issuing the registered warrants, as they are formally known, to preserve cash for creditors who have standing under the state's constitution - including bondholders. IOUs were issued to creditors without such legal protections, including vendors, county governments, and taxpayers owed refunds.

Last week, Controller John Chiang announced the state has recovered enough to allow the IOUs to be redeemed Sept. 4, almost a month ahead of their original Oct. 2 maturity.

IOU holders will be paid a 3.75% annualized interest rate for their trouble, and it looks like none of them used SecondMarket for an early exit.

About 250 would-be buyers signed up for the SecondMarket platform, and about $2.5 million in IOUs were posted for sale, said SecondMarket vice president Mark Murphy.

But no transactions were done.

"The sellers primarily are asking for 100 cents on the dollar, but the buyers to this point don't want to pay that price," he said.

Through Tuesday, the controller has issued more than 366,000 IOUs for $2.08 billion, said spokeswoman Hallye Jordan.

The state plans to redeem the IOUs Sept. 4 after closing next week on a $1.5 billion short-term cash-flow loan from JPMorgan. That loan in turn is to be taken out when the state issues a $10.5 billion revenue anticipation note offering in September, a deal to be managed by JPMorgan.

After the state started issuing IOUs, the Securities and Exchange Commission announced that it considered them securities subject to federal securities laws, which therefore should be traded by registered broker-dealers.

That announcement appeared to be a reaction to an informal IOU marketplace that appeared to be developing on Web sites like eBay and craigslist, where ads appeared offering to buy IOUs at discounts to face value.

The Municipal Securities Rulemaking Board followed with its own statement, noting that the California IOUs were subject to the same rules and guidelines that apply to other municipal securities, noting in particular that fair pricing guidelines applied.

SecondMarket never expected the IOU platform to become a huge profit center, Murphy said.

"The positions were too small," he said. "As good corporate citizens, and the leading illiquid securities marketplace, we thought we should open the marketplace."

It was a valuable exercise nonetheless, he said. The firm was able to set up the marketplace in about six days, compared to the 10 to 12 days when it set up an auction-rate securities marketplace in February 2008, Murphy said.

"It showed our platform was highly scalable and we were able to adapt to new markets as they arrive."

Municipal securities brokers Hartfield Titus & Donnelly LLC also created a trading system for California IOUs.

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