A new stock exchange based in Dallas and backed by financial powerhouses BlackRock and Citadel Securities is poised to challenge the dominance of the New York Stock Exchange and Nasdaq in the listing and trading of companies and funds.
The Texas Stock Exchange, or TXSE, has raised approximately $120 million from more than two dozen investors, including BlackRock and Citadel Securities, as well as some unnamed business leaders, according to a statement Wednesday.
The exchange has not yet registered with the Securities and Exchange Commission, which will be its main regulator, but intends to do so later this year. You cannot begin trading without approval from the SEC. The exchange announcement was first reported by The Wall Street Journal.
Established exchanges have come under fire in recent years for what some investors have seen as onerous costs for services such as access to trading data, and by companies that have complained about regulatory overreach, such as rules targeting diversity and the governance of the board of directors.
James Lee, founder and CEO of TXSE Group, the exchange’s parent company, said the large number of Texas companies that are publicly traded or have the potential to go public also influenced the decision to locate in Dallas.
Companies like Tesla and Hewlett-Packard Enterprise have moved their headquarters to Texas in recent years, joining others like American Airlines and Exxon Mobil, which have been there for decades. Lee said there were also thousands of private equity-backed companies in Texas, many of which may be considering going public, that TXSE also intended to target.
“Texas and the other states in the southeast quadrant have become economic powerhouses,” Lee said. “Combined with the demand we are seeing from investors and corporations for expanded alternatives to trading and listing stocks, this is an opportune time to build a major national stock exchange in Texas.” BlackRock said in a statement that he looked forward to “engaging with other investors on the benefits of TXSE’s unique value proposition.”
Dislodging entrenched exchanges like the New York Stock Exchange and Nasdaq, the product of repeated mergers as they absorbed rivals, is no easy task.
Traders tend to flock to the largest exchanges with the most transactions, because more trading activity typically leads to better prices.
The Long Term Stock Exchange began in 2016 with the mission of creating a more equitable and sustainable capital market; It took three years to get regulatory approval, didn’t start trading until 2020, and now has two companies listed on its stock exchange. IEX, an electronic exchange that sought to prevent ultra-fast trading firms from gaining a competitive advantage on speed alone, has had some success since its inception in 2014, but is still overshadowed by the NYSE and Nasdaq.