The upcoming launch of the Texas Stock Exchange (TXSE) in 2025 signals a major shift in the U.S. financial landscape, potentially challenging the long-held dominance of the New York Stock Exchange (NYSE) and Nasdaq. Supported by heavyweights such as BlackRock and Citadel Securities, TXSE has secured around $120 million in funding and plans to submit its registration to the U.S. Securities and Exchange Commission (SEC) later this year. This development could reshape the equities market by offering a more business-friendly alternative with reduced compliance costs and greater listing stability. The announcement follows the recent NYSE debacle featuring a glitch with Berkshire Hathaway stock, which led to the appearance of the stock falling 99.97%.
Texas Offers Business-Friendly Alternative to NYSE, Nasdaq
TXSE Group Inc., the parent company of the Texas Stock Exchange, aims to create a fully electronic, national securities exchange headquartered in Dallas, Texas. This initiative is driven by a desire to offer a more business-friendly environment compared to the NYSE and Nasdaq, which have faced criticism for their stringent regulations and high compliance costs. James Lee, founder and Chief Executive Officer of TXSE Group, emphasized the need for greater stability and predictability around listing standards and associated costs. TXSE intends to provide a competitive trading and listing venue for public companies, exchange-traded products (ETPs), and American Depositary Receipts (ADRs).
Texas has become a major economic powerhouse, attracting many Fortune 500 companies and private equity firms due to its lower taxes and fewer regulations. The notable growth in population and economic vitality provide solid foundations for a successful TXSE launch. Leveraging these foundations, TXSE aims to offer a more attractive option that promises consistent and reliable trading environments, benefiting investors, companies, and liquidity providers.
Why TXSE and Why Now?
The establishment of the Texas Stock Exchange (TXSE) comes at a time when the U.S. equities market is dominated by the NYSE and Nasdaq, both of which have maintained a virtual duopoly since the 2000s. Notable regional stock exchanges have been absorbed and weaved into either the NYSE or the Nasdaq, following regulatory changes that favored environments with automated trading. For TXSE to carve out a space in this competitive landscape, it will need to attract significant trading volumes to compete effectively with these established giants. High trading volumes are essential for ensuring better prices and liquidity, which are key factors that draw traders to the largest exchanges.
Previous attempts to challenge the dominance of the NYSE and Nasdaq, such as the Long-Term Stock Exchange and IEX, have faced significant hurdles and struggled to gain traction. Despite these challenges, TXSE aims to differentiate itself by providing a more favorable business environment, with lower compliance costs and greater stability around listing standards. Texas’s business-friendly climate, combined with its economic growth, provides a compelling case for the success of this new exchange.
Obtaining SEC approval is a critical step for TXSE to become operational. The SEC oversees U.S. securities markets and ensures fairness and efficiency. The process of obtaining SEC registration is intricate, with rigorous requirements concerning exchange rules, technology infrastructure, and investor protections. TXSE plans to submit registration documents to the SEC later this year, with the goal of initiating trades in 2025 and hosting its first listing in 2026. The exchange will be fully electronic, leveraging technological advancements to offer high-quality services. The success of TXSE will depend on its ability to construct these robust technological mechanisms with the added difficulty of attracting high-end institutional participants in the market for an alternative to the legacy platforms in Nasdaq and the NYSE.
The political and cultural context also plays a role in the establishment of TXSE. Several right-leaning states (including Texas) have curbed their public pension funds from doing business with firms that align with environmental, social, and governance (ESG) guidelines. The new exchange aims to attract companies frustrated by stringent listing standards and rising compliance costs at the NYSE and Nasdaq, including rules like Nasdaq’s board diversity requirements. While some analysts suggest TXSE could serve as a listing or trading alternative for conservative-leaning companies, the exchange has emphasized that it is apolitical and focused on providing a more favorable environment for businesses.
The market reaction to the proposed TXSE has been mixed. While some investors and market participants welcome the prospect of increased competition and expanded alternatives for trading and listing equities, others express skepticism about the exchange’s ability to challenge the entrenched dominance of the NYSE and Nasdaq. Concerns have been raised about the potential relaxation of listing standards and the implications for investor protections. Tyler Gellasch, president of the Healthy Markets Association, noted that companies have complained about onerous listing standards for decades, but investors need robust protections to ensure the integrity and liquidity of the markets. Dennis Kelleher, president of the financial reform advocacy group Better Markets, echoed this sentiment, emphasizing the need for a level playing field that benefits investors.
TXSE Poised to Reshape Markets
Located in Dallas, Texas’s biggest financial hub, the Texas Stock Exchange (TXSE) aims to shake up the U.S. financial markets by offering a fresh alternative to the long-standing giants. With Texas’s growing economy and business-friendly climate, TXSE plans to provide a platform that caters to companies frustrated with the stringent regulations of existing exchanges. Backed by influential organizations, the exchange is set to create a competitive environment that could reshape market dynamics.
As TXSE works toward SEC approval and builds its technological framework, the financial world will be watching closely. If successful, TXSE could carve out a significant niche in the market, offering benefits to investors and companies alike. The coming years will be pivotal in determining whether TXSE can fulfill its ambitions and become a major force in the U.S. financial landscape.