The landscape of U.S. financial markets is on the verge of a significant shift with the announcement of the Texas Stock Exchange (TXSE), a new player set to enter the arena with substantial backing. The TXSE Group revealed plans on Wednesday to establish this new exchange, supported by $120 million in capital from over two dozen investors, including industry giants BlackRock and Citadel Securities. The exchange aims to file for registration with the Securities and Exchange Commission (SEC) later this year and expects to begin operations in 2025, with its first listings anticipated in 2026.
James Lee, CEO of TXSE Group, emphasized the strategic timing and location of the new exchange. "Texas's booming economy and the strong economic and population growth among states in the southeast quadrant of the U.S. present incredible opportunities for businesses - and ultimately the Texas Stock Exchange," Lee stated on LinkedIn. He added that TXSE will foster competition around quote activity, liquidity, and transparency, which will benefit investors, global issuers, and liquidity providers alike.
The TXSE aims to capitalize on the robust economic conditions and population growth in Texas and neighboring states, including Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina, and Tennessee. This region, defined by TXSE as the "southeast quadrant," has seen significant business migration and growth. Over 25,000 businesses relocated to Texas between 2010 and 2019, lured by the state's lack of income taxes and business-friendly environment.
The Dallas-headquartered exchange plans to differentiate itself by being more accommodating to CEOs who have expressed frustration with the stringent regulations and higher compliance costs of established exchanges like the Nasdaq and New York Stock Exchange (NYSE). This "CEO-friendly" approach is expected to attract companies seeking a less burdensome regulatory environment.
In recent years, Texas has emerged as a major business hub, particularly for financial services. Notable companies like Goldman Sachs, JPMorgan Chase, and Charles Schwab have expanded their presence in the state, with Schwab relocating its headquarters to Dallas in 2021. The influx of businesses and the state's economic vitality have positioned Texas as a fertile ground for a new national stock exchange.
The TXSE will be fully electronic, leveraging advanced technology to enhance trading efficiency and transparency. The exchange's entry into the market is timely, as it seeks to provide more stability and predictability around listing standards and associated costs, addressing a critical concern for corporate issuers and exchange-traded product sponsors.
Despite the promising outlook, the TXSE will face competition from established players. However, its significant capital backing and strategic focus on the southeast quadrant could give it a competitive edge. Additionally, the exchange's emphasis on accommodating business needs aligns with broader market trends favoring more flexible and supportive regulatory environments.
The move also comes at a time when sustainable investing is gaining prominence, with existing exchange operators increasing their focus on environmental, social, and governance (ESG) business opportunities. Notably, Texas has been a battleground for ESG principles, with the state's political leadership often at odds with Wall Street firms that have embraced these principles. BlackRock, one of TXSE's backers, has navigated these political dynamics, with CEO Larry Fink seeking to build rapport with Republican officials despite Texas' blacklisting of the asset manager over its ESG stance.
As TXSE moves forward, it aims to create a more competitive and investor-friendly market environment. "TXSE will ultimately create more competition around quote activity, liquidity and transparency, resulting in more consistent and reliable markets," Lee emphasized.
The exchange's ambitious plans highlight the ongoing evolution of the financial markets, driven by regional economic strengths and the quest for more adaptable and efficient trading platforms. With its strong backing and strategic vision, TXSE is poised to make a significant impact on the U.S. financial landscape.
