Florida may be “Wall Street South,” but there’s a bold move brewing in Texas in the form of a new stock exchange that’s fixing to take on the NYSE (NYSE:ICE) and Nasdaq (NASDAQ:NDAQ). The Texas Stock Exchange (TXSE), backed by top guns like BlackRock (NYSE:BX) and Citadel Securities, has raised $120 million and is gearing up to compete head-to-head with the big boys in New York to better serve the companies listed.
The TXSE’s Competitive Edge – Lower Compliance Costs
The maverick TXSE will use its lower compliance costs as a competitive edge to rope in clients. This could be a whole new rodeo for businesses seeking capital, especially with rising regulatory costs elsewhere. While fully electronic, the TXSE will establish its headquarters in Dallas, further bolstering the city’s growing financial sector, which has already attracted big wigs like Goldman Sachs (NYSE:GS) and Charles Schwab (NASDAQ:SCHW).
The exchange expects to be operational by 2025 and have its first listed company in 2026. BlackRock, a major investor, sees the TXSE as a way to “increase liquidity and improve market efficiency” for its clients and investors. This could potentially benefit everyone involved by creating a more dynamic and efficient market.
A Crowded Ring
The U.S. already has 16 equities exchanges, with NYSE and Nasdaq dominating over 35% of trading volume. Established players offer listing incentives like marketing in Times Square and opening bell ceremonies to attract companies. The TXSE will need to stake its claim and convince companies of its long-term value. In addition, it isn’t alone in its quest for market disruption.
Earlier this year, Citadel Securities backed Howard Lutnick’s new futures exchange, FMX, which aims to launch in September. MEMX, another exchange founded in 2019, protests high data and connectivity fees charged by existing exchanges. It already captures a significant portion (2.4%) of U.S. equities volume. Other established players like IEX and MIAX also promote market fairness and competitive pricing.
Texas Is Business-Friendly
Texas has broad appeal for financial firms. The state’s low tax rates and less stringent regulations relative to major financial centers like New York and California are attracting corporations and financial institutions. For example, Goldman Sachs is building a massive Dallas campus, and JPMorgan’s (NYSE:JPM) Texas workforce is booming. This trend could position Texas as a major financial hub alongside established players.
Key Takeaway – TXSE Could Disrupt the Status Quo
This isn’t expected to be easy. The Texas Stock Exchange will face significant challenges against the dominance of the NYSE and Nasdaq. However, with backing from major investors and a focus on lower costs and increased efficiency, the TXSE could disrupt the status quo. This announcement, along with other recent exchange initiatives, shows that there are always new gunslingers wanting to prove they can do things better. Investors could eventually benefit from new innovations and a potentially more efficient trading landscape.
