BlackRock Inc., Citadel Securities and other investors are backing an upstart Texas stock market, laying down a challenge to the New York Stock Exchange and Nasdaq Inc. and signaling a potential boost for a state trying to grab more of the financial services industry.
The Texas Stock Exchange has raised $120 million and plans to file registration documents with the US Securities and Exchange Commission, according to a LinkedIn post by James Lee, the exchange’s chief executive officer.
The Texas bourse will try to entice companies seeking relief from rising compliance costs at the NYSE and Nasdaq, Lee told the Wall Street Journal, which earlier reported the development. While entirely electronic, Lee said the TXSE will be headquartered in Dallas, bolstering a metro area that has been gaining financial jobs from the likes of Goldman Sachs Group Inc. and Charles Schwab Corp.
“The Texas Stock Exchange will focus on enabling US and global companies to access US equity capital markets and will provide a venue to trade and list public companies and the growing universe of exchange-traded products,” the TXSE said in a statement.
The exchange aims to handle its first trades in 2025 and host its first listing in 2026, Lee told the Journal. A spokesperson for Ken Griffin’s Citadel confirmed the company is an investor in the project. BlackRock said the project would “increase liquidity and improve market efficiency” for its clients and other investors.
The Texas venture is trying to muscle in on a business that consists of about 16 equities exchanges with widely varying trading volumes. NYSE exchanges accounted for more than 20% of the volume in US equities trading in May, with Nasdaq representing over 15%, according to data compiled by Bloomberg.
The listing of companies looking to tap the public market is also highly competitive. To entice corporations to choose their venues for initial public offerings, exchanges typically offer sweeteners like marketing on billboards in Times Square and ringing the opening bell on the floor. Once a company is listed, it generates steady income for the exchange as long as it doesn’t leave for a rival venue.
The TXSE is hardly the first initiative in which a group of market participants has backed a new exchange operator in hopes of disrupting the incumbents. Earlier this year, banks and market makers including Citadel Securities got behind Howard Lutnick’s new futures exchange, FMX, which is slated to launch in September.
Another exchange, MEMX, was founded in 2019 as a protest by banks and market makers against the rising data and connectivity fees charged by US stock markets. Its exchange accounted for 2.4% of US equities volumes in May, making it the sixth-largest in the country, data shows.
Backers of that platform, which also added an options exchange, include a suite of legacy financial institutions such as Goldman and JPMorgan Chase & Co., as well as market makers Citadel Securities and Virtu Financial Inc.
IEX, the firm made famous by Flash Boys, Michael Lewis’s book about high-frequency trading, touts itself as a champion for market integrity and fairness in pricing for participants. It represented about 1.8% of average daily US equities-trading volume in May. Similarly, Miami International Holdings Inc., or MIAX, accounted for only 1.7%.
Texas has been increasingly luring corporations and financial firms by offering lower taxes and a more relaxed regulatory environment than blue states such as New York and California.
Goldman is building a new regional campus in Dallas with room for more than 5,000 employees, while JPMorgan’s Texas workforce has surpassed 30,000 in recent years as its New York total has slipped to less than 29,000.
The state is also developing a business-court system with an eye to handling more of the complex corporate litigation that Delaware is known for.
Elon Musk’s Tesla Inc. is asking shareholders at this month’s annual meeting to support a proposal to move the company’s articles of incorporation to Texas from Delaware. Earlier this year, Musk said that SpaceX, his rocket maker, was already moving its incorporation to Texas.
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