FORTUNE — Twitter CEO Dick Costolo took a few potshots yesterday at the secondary markets — the private exchanges where early employees and investors can sell off the shares they hold in not-yet-public companies to willing buyers. Calling them a “distraction,” Costolo said Twitter has retroactively put in place policies to restrict trading in its much-buzzed-about stock.

“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 said at Fortune’s Brainstorm Tech gathering.

SecondMarket CEO Barry Silbert took the stage Wednesday and hit back. “It can be a complete distraction,” he said — but only if the process isn’t managed.

“The whole concept of secondary trading is not new, it just used to happen in back alleys,” Silbert said. “If it’s done in an organized way, it’s better.”

Silbert’s company, which jumped into the market two years ago, is now closing in on $800 million in processed transactions, he said. It also made two key changes this year to address concerns like Costolo’s.

First, SecondMarket now only facilitates trading in companies that have explicitly given it permission to do so. That change cut its transaction volume — $115 million last quarter, down 27% from a quarter earlier. Second, it’s working with companies to standardize the financial disclosures they provide to potential buyers.

“We require the company to provide information,” Silbert said. It’s not as extensive as the 10-Q reports public companies file quarterly, but “we are out there trying to develop what should be a standard disclosure package.”

But like Twitter, companies are drafting new rules to manage the trading.

“What I’m counseling my boards and my companies to do is amend the bylaws to give the company more control over how secondary market transactions happen,” said Benchmark Capital Matt Cohler. “Pretty universally, companies are responding to that.”

Silbert wants his company to become a recognized alternative for venture-backed companies: They can IPO, get sold or stay private indefinitely and let investors liquidate their stakes privately. The best indication that his plan may work is that venture capitalists are signing on.

Hans Swildens, managing director of investment firm Industry Ventures, called the burgeoning private-trading volume “extremely good for all the secondary players, because it just makes the market bigger.”

Ten years ago “it was almost too small to sustain companies,” he said. “Now there’s $ 5 billion to $10 billion in the market of people buying.”

See below for a full video of the discussion.

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