BlackRock and Citadel Securities Back Start-Up Texas Stock Exchange

Business|New Stock Exchange in Texas Takes Aim at N.Y.S.E. and Nasdaq

The Texas Stock Exchange, based in Dallas, has the backing of BlackRock and Citadel Securities. But challengers to the dominant New York markets have gained little traction.

The founder of the new exchange said that the large number of Texas companies with public listings or the potential to go public played a role in the decision to set up in Dallas.Credit…Emil Lippe for The New York Times

Joe Rennison

A start-up stock exchange headquartered in Dallas and backed by the financial powerhouses BlackRock and Citadel Securities is set to challenge the dominance of the New York Stock Exchange and Nasdaq in the listing and trading of companies and funds.

The Texas Stock Exchange, or TXSE, has raised roughly $120 million from more than two dozen investors, including BlackRock and Citadel Securities as well as some unnamed business leaders, according to a statement on Wednesday.

The exchange has yet to register with the Securities and Exchange Commission, which will be its primary regulator, but intends to do so later this year. It cannot begin operating without the S.E.C.’s approval. The announcement of the exchange was first reported by The Wall Street Journal.

Established exchanges have come under fire in recent years for what some investors have seen as onerous costs for services like accessing trading data, and from companies that have grumbled about regulatory overreach, such as with rules targeting board diversity and governance.

James Lee, the founder and chief executive of TXSE Group, the parent company of the exchange, said that the large number of Texas companies with public listings or the potential to go public also played a role in the decision to set up in Dallas.

Companies like Tesla and Hewlett-Packard Enterprise have moved their headquarters to Texas in recent years, joining others like American Airlines and Exxon Mobil, which have been there for decades. Mr. Lee said there were also thousands of private-equity backed companies in Texas, many of which could be considering going public, that TXSE also intended to target.

“Texas and the other states in the southeast quadrant have become economic powerhouses,” Mr. Lee said. “Combined with the demand we are seeing from investors and corporations for expanded alternatives to trade and list equities, this is an opportune time to build a major, national stock exchange in Texas.” BlackRock said in a statement that it looked forward “to engaging with the other investors on the benefits of the TXSE’s unique value proposition.”

Dislodging the entrenched exchanges like the N.Y.S.E. and Nasdaq, themselves the product of repeated mergers as they absorbed rivals, is no small task.

Traders tend to flock to the largest exchanges with the most transactions, because typically more trading activity leads to better prices.

The Long Term Stock Exchange started in 2016 with a mission to create a more equitable and sustainable capital market; it took three years to gain regulatory approval, didn’t begin trading until 2020, and now has two companies listed on its exchange. IEX, an electronic exchange that sought to disrupt superfast trading firms from gaining a competitive edge on speed alone, has had some success since its start in 2014, but is still dwarfed by the N.Y.S.E. and Nasdaq.

Joe Rennison writes about financial markets, a beat that ranges from chronicling the vagaries of the stock market to explaining the often-inscrutable trading decisions of Wall Street insiders. More about Joe Rennison

William Murphy

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