In Texas, everything is bigger, even their ambitions.
TXSE Group last week Plans to open the Texas Stock ExchangeThe group has received $120 million in backing from more than 20 investors, including asset management and liquidity giants BlackRock Inc. and Citadel Securities Inc. The group plans to file for registration with the Securities and Exchange Commission later this year. Start promoting your business It is expected to go public in 2025, with its initial public offering the following year.
TXSE Group CEO James Lee said the exchange was capitalizing on “the state of Texas’s booming economy and the strong economic and population growth among the southeastern U.S. states.” Balance sheet friendly tax system and plenty of room for companies to expandhas added more than 300 corporate headquarters since 2015, including Charles Schwab in 2021. The Lone Star State is home to $2.4 trillion economy For the past six consecutive quarters, China’s economic growth has outpaced that of the U.S. economy.
The exchange’s goal, Li said, is to increase competition over price movement, liquidity and transparency, and position itself as a rival to the New York Stock Exchange and Nasdaq.
Dallas businesses are also excited about the possibility of an exchange being established in the state, seeing it as recognition of the city and state’s growing financial services industry and strengthening its credibility as a fast-growing business center.
“Having an exchange here adds importance to the capital markets sector and the overall business environment,” said Adam Gersting, president of the Dallas office of consulting firm West Monroe Inc. “It could attract more companies here and open up additional avenues for growth, for example through public investment in companies based here.”
David Choate, chief operating officer at Dallas-based institutional brokerage Capital Institutional Services Inc., agreed. Having a national exchange based in the state “only continues to add another layer to our nation’s story as the financial center of the Southwest,” Mr. Choate said.
Texas Association of Business (TAB) Expressed support for TXSE Group’s effortsTAB CEO Glenn Hammer praised the development as a testament to the state’s pro-business policies that have attracted companies in recent years, making the state “an ideal location for the nation’s newest stock exchange to rival the current duopoly of the NYSE and Nasdaq.”
“I am encouraged, but not surprised, that the financial services industry’s top leaders are recognizing what we’ve known for years: Texas is rapidly becoming a hub for the financial services industry,” Hammer said in a statement.
A market for the market
According to Chris Halverson, director of institutional sales at CAPIS, the biggest challenge the new exchange will face once it goes live is not just attracting listed companies but also trading volume.
Trading volume or trading volume is the total number of securities traded on an exchange during a particular period, including stocks, bonds, options, and commodities. For example, as of Friday, the NYSE was trading at Total volume $3.7 billion, and Nasdaq $4.8 billion.
Outside of the two largest U.S. exchanges, smaller ones have around 2% to 3% market share, according to Halverson. Silicon Valley-based Long-Term Securities Exchange, which was approved by the SEC in 2019, said: Just two lists.
IEX (Michael Lewis’ 2014 book ” Flash Boys) and Members Exchange (MEMX) are among the most competitive new exchanges, but still have trading volume share in the 2-3% range, but have managed to survive thanks to key differentiators such as new high-speed trading technology.
“The real problem is, [the TXSE] “Can the TXSE gain market share, both in the listed market and the order flow market? It’s going to be an uphill battle,” said Jim Angell, an associate professor at Georgetown University’s McDonough School of Business. The TXSE will have to poach listed companies from the NYSE and Nasdaq.
“There are a lot of companies that have tried to take listings off New York and Nasdaq — Chiboe, IEX, Long Term Securities Exchange,” Angel said. “They have a tough job ahead of them because there’s been failures in this space.”
There are currently 16 exchanges in the United States, all of which operate electronically. Over the past two decades, most regional stock exchanges outside of New York have either closed or been acquired by larger companies. Nasdaq is the largest exchange in the world. Philadelphia and Boston In 2008, the New York Stock Exchange acquired the Pacific Exchange, and in 2018, the New York Stock Exchange acquired the Pacific Exchange. Chicago Board of Trade.
The US National Market System connects all SEC approved exchanges and essentially requires brokers to trade on the exchange that offers the best price, meaning all traders are automatically connected to all exchanges.
According to Angel, this is both a blessing and a curse for an upstart exchange like TXSE. Although TXSE touts itself as offering looser regulatory standards than its larger competitors, Angel is unconvinced. He said that the playing field remains level from a regulatory perspective, given that the SEC imposes strict requirements on all market participants.
He also said the communal nature of the U.S. foreign exchange market would create more competition for trading volumes.
“Unless they come up with some special technology that we haven’t revealed yet, they’re going to have some pretty tough competition because once the stock is listed on their exchange, it can be traded anywhere else,” Angel said.
But Angel said he sees new entrants as a positive for developing new technologies and standards within the industry, and there’s no harm in trying.
“I love to see competition. I love to see innovation,” Angel said. “They have a lot of work to do. They’re going into a very competitive field and they’re going up against very talented people. It’s going to be a tough battle.”
