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Backed by major Wall Street players like BlackRock and Citadel Securities, the Texas Stock Exchange (TXSE) is setting the stage to challenge the traditional strongholds of the New York Stock Exchange and Nasdaq.
Image Source: Business Standard
Announced by CEO James Lee, the TXSE has successfully raised approximately USD 120 million in preparation for its launch. Plans are in place to file necessary registration documents with the Securities and Exchange Commission later this year, aiming to start trading in 2025 and host its first listing by 2026.
The TXSE is capitalizing on growing dissatisfaction with the rising compliance costs and recent regulatory changes at the established exchanges, such as Nasdaq’s board diversity targets. Its founders have committed to creating a more CEO-friendly environment. This initiative aligns with the broader trend of companies migrating to states like Texas, which offer more favorable regulatory and tax environments. Texas now hosts more Fortune 500 companies than any other state, with significant expansions like Goldman Sachs’ new Dallas campus, poised to accommodate over 5,000 employees.
“Dallas has become one of, if not the most, dominant financial centers in the country, if not the world,” Lee stated. Despite rumors of an “anti-woke” agenda, Lee emphasizes that the exchange maintains an apolitical stance.
Image Source: The New Arab
Image Source: The New Arab
TXSE plans to operate entirely electronically but will also establish a physical presence in downtown Dallas. The exchange aims to compete aggressively for primary and dual listings and hopes to attract exchange-traded products as well. Overcoming the long-standing duopoly of NYSE and Nasdaq will be challenging. History shows that other exchanges like IEX and Cboe Global Markets have struggled to break into the market, and the Long-Term Stock Exchange, approved by the SEC in 2019, only hosts two listings.
The success of TXSE could hinge on the support of its backers. Citadel Securities, a leading electronic trading firm, and BlackRock, the largest asset manager globally, have previously supported new exchanges like MEMX, which now handles between 2% and 3% of the stock market’s volume. The SEC’s regulations that mandate large brokers to connect to all exchanges could also play a role in leveling the playing field for the TXSE.
This initiative is part of a broader effort to enhance Texas’s stature as a financial hub, further exemplified by the recent establishment of Texas Business Courts as an alternative to Delaware’s Chancery system. The move aligns with Tesla’s current deliberations to relocate its incorporation from Delaware to Texas, following criticism from Elon Musk about the Delaware system after a court decision affected his compensation package.
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