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The New Texas Stock Exchange focuses on New York’s dominance

A group backed by Wall Street heavyweights BlackRock and Citadel Securities plans to launch a new national stock exchange in Texas, aiming to take on what they say are burdensome regulations at the New York Stock Exchange and Nasdaq.

A group backed by Wall Street heavyweights BlackRock and Citadel Securities plans to launch a new national stock exchange in Texas, aiming to take on what they say are burdensome regulations at the New York Stock Exchange and Nasdaq.

The Texas Stock Exchange, which has raised about $120 million from private individuals and large investment firms, plans to file registration documents with the Securities and Exchange Commission later this year, CEO James Lee told The Wall Street Journal. The goal is to start facilitating transactions in 2025 and host the first listing in 2026.

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The Texas Stock Exchange, which has raised about $120 million from private individuals and large investment firms, plans to file registration documents with the Securities and Exchange Commission later this year, CEO James Lee told The Wall Street Journal. The goal is to start facilitating transactions in 2025 and host the first listing in 2026.

The exchange wants to respond to the dissatisfaction about the increasing compliance costs at Nasdaq and NYSE and newer rules, such as setting goals for board diversity at Nasdaq. The proponents of the TXSE, famously, promise that it will be more CEO-friendly.

Also behind the move is a changing American business landscape, with dozens of companies moving to states with more favorable regulatory and tax policies. Texas is now home to more Fortune 500 companies, including Exxon Mobil, AT&T and American Airlines, than any other state. Goldman Sachs broke ground last year on a campus in Dallas that it said could house more than 5,000 employees.

“Dallas has become one of, if not the most dominant financial centers in the country, if not the world,” Lee said.

For months, there has been talk in trading communities about launching a new, “anti-woke” exchange in Texas. Lee says the fair is apolitical.

TXSE will be entirely electronic but plans to have a physical presence in downtown Dallas, said Lee, a Texan who has worked in the financial and trading industries for about three decades. The exchange plans to compete for primary and dual listings. The TXSE also hopes to attract listings of exchange-traded products.

It would be no easy feat to get the new fair off the ground. NYSE and Nasdaq form an effective duopoly on the listings of American corporate shares. Other exchanges, including IEX and Cboe Global Markets, have tried to break into the stock market but have gained little traction. The Long-Term Stock Exchange, which was approved by the SEC in 2019, has two listings.

Decades ago, there were dozens of regional exchanges outside New York, but they closed or were taken over by larger players. The Boston Stock Exchange, the Chicago Stock Exchange and the Philadelphia Stock Exchange are among the companies that have merged into the parent companies of the NYSE and Nasdaq over the past two decades.

Attracting trading volumes to a new exchange is also a challenge. Traders often send orders to exchanges with the largest volumes. TXSE hopes its donors will help.

Citadel Securities is one of the world’s largest electronic trading firms, and BlackRock is the world’s largest asset management firm. BlackRock and Citadel Securities have a history of backing upstart exchanges, including MEMX, which handles between 2% and 3% of stock market volume, according to Cboe data.

Start-ups also benefit from SEC rules that effectively force large brokers to join every exchange – even those with a small market share – and pay for connections and market data.

This isn’t the first attempt to bring more finance to the Lone Star State. Texas Governor Greg Abbott, a Republican, met with exchange officials in 2020 to pitch a move of their electronic trading centers to the state from New Jersey, which at the time was considering a financial transactions tax. The move never got off the ground.

The newly formed Texas Business Courts, created as an alternative to the Delaware Court of Chancery system, is another sign of the state’s growing stature, Lee said.

The courts are currently taking center stage as Elon Musk’s Tesla holds a shareholder vote on whether to move its incorporation from Delaware to Texas.

“Never incorporate your company in the State of Delaware,” Musk tweeted after the Delaware Court of Chancery struck down his billion-dollar salary earlier this year.

Write to Corrie Driebusch at [email protected]

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