NYSE and Nasdaq will soon have a new competitor: TXSE.
A new stock exchange is seeking approval to set up in the United States and has a powerful backer.
On Wednesday, TXSE Group announced plans to establish the Dallas-based Texas Stock Exchange. The group is backed by BlackRock (NYSE:BLK), the world’s largest asset management firm, and Citadel Securities, a market maker that provides liquidity to the markets.
If approved, the Texas Stock Exchange (TXSE) would establish itself as a national alternative to the New York Stock Exchange and Nasdaq, the two largest exchanges in the United States.
TXSE is backed by some of the biggest names in the business.
TXSE Group raised $120 million from about 26 investors, including BlackRock and Citadel. These two companies account for a significant portion of the stock volume on U.S. exchanges.
A fully electronic exchange will provide a venue for trading and listing listed companies and publicly traded products. TXSE said the new exchange comes at a time when corporate issuers and sponsors of publicly traded products are seeking more stability and predictability in terms of listing standards and costs.
According to The Wall Street Journal, exchange executives describe it as “more CEO-friendly” due to fewer regulatory issues and lower compliance costs.
“Changes in the equity trading market are driving increased trading volume on exchanges and more choice for issuers and sponsors,” said James Lee, founder and CEO of TXSE Group. “TXSE will ultimately create more competition around quote activity, liquidity and transparency, creating a more consistent and reliable market that benefits investors, global issuers and liquidity providers alike.”
Why Texas?
In recent years, in addition to the NYSE and Nasdaq, independent stock exchanges have opened in other regions of the United States, including Boston, Philadelphia, and Chicago. However, other stock exchanges have been taken over by Nasdaq or the Intercontinental Exchange, which owns the NYSE.
In addition to the two major stock exchanges, there are also two major derivatives exchanges: CBOE Global Markets and CME Group, which includes the Chicago Mercantile Exchange. In 2018, the Members Exchange was launched as an alternative to the Big 2, but was only able to capture a small fraction of derivatives trading volume.
Lee said Texas was “an obvious choice for establishing a new national stock exchange” because of its strong economy and the fact that it is home to more Fortune 500 companies and private equity sponsors than any other state.
He also said the southeastern United States serves as headquarters for more than 1,500 publicly traded companies.
“We are excited to realize our long-held vision for a national stock exchange in Texas,” Lee said. “Texas and other states in the Southeast have become economic powerhouses. “With the need for investors and companies to expand their alternatives to trading and listing their stocks, now is a great opportunity to establish a large-scale national stock exchange in Texas.”
Still requires SEC approval
TXSE Group plans to file exchange registration documents with the U.S. Securities and Exchange Commission later this year. So this is definitely not a done deal as there are still regulatory hurdles to clear.
According to foreign media such as the Wall Street Journal, once the Texas Stock Exchange receives SEC approval, management expects trading to begin in 2025.
There was little change in stock prices on Thursday’s TXSE news, with the NASDAQ (NASDAQ:NDAQ) and NYSE:ICE each down less than 1%.
