A consortium backed by financial powerhouses BlackRock and Citadel Securities is preparing to launch the Texas Stock Exchange (TXSE), a new national stock exchange based in Texas.
This move is aimed at providing an alternative to what the consortium views as burdensome regulations at the New York Stock Exchange and Nasdaq. The TXSE has successfully secured around $120 million in funding from individual investors and prominent investment firms and is set to file its registration documents with the Securities and Exchange Commission later this year. James Lee, the CEO, announced plans to initiate trading activities in 2025 and host the exchange’s first listing in 2026.
The TXSE seeks to capitalize on the dissatisfaction among corporations with rising compliance costs and the recent implementation of regulatory measures, such as Nasdaq’s board diversity targets. Its backers promise a more CEO-friendly environment, positioning the TXSE as an attractive venue for companies.
Texas's appeal as a financial hub is growing, evidenced by major companies like Exxon Mobil, AT&T, and American Airlines relocating their headquarters there, attracted by the state’s favorable regulatory and tax environment. Goldman Sachs’s new Dallas campus, which is expected to accommodate over 5,000 employees, underscores the state's rising prominence in finance.
Lee emphasizes Dallas's stature as a leading global financial center and dispels notions of the TXSE being politically motivated, asserting its apolitical stance despite its label as an “anti-woke” exchange in trading circles.
The TXSE, which will operate entirely electronically, also plans to establish a physical presence in downtown Dallas. It aims to compete for both primary and dual listings and seeks to attract a variety of exchange-traded products.
Despite the challenges faced by new entrants in breaking the NYSE and Nasdaq’s stronghold on U.S. corporate stock listings, the TXSE is hopeful. Its success could be buoyed by significant support from its investors, including Citadel Securities, one of the world’s leading electronic trading firms, and BlackRock, the largest asset management firm globally. Both have previously supported successful new exchanges, such as MEMX, which now handles a modest but growing share of the stock market’s volume.
Historically, several regional stock exchanges in the U.S. have either ceased operations or merged into larger entities over the past decades, illustrating the high barriers to entry in this space. However, SEC regulations that require large brokers to connect to all exchanges could work in TXSE’s favor by facilitating integrations and market data exchanges even with smaller market shares.
The establishment of the Texas Business Courts as an alternative to the Delaware Court of Chancery system is another indicator of Texas's increasing financial clout. This initiative gained additional visibility when Elon Musk considered relocating Tesla’s incorporation from Delaware to Texas, following a controversial court ruling against him by the Delaware system.
With strategic backing and a clear vision, the TXSE aims to redefine the landscape of American stock exchanges, enhancing Texas's position as a key player in the national and global financial sectors.
