(Kitco News) – BlackRock, the world’s largest asset manager, continues to enhance its presence in financial markets, with the Wall Street Journal reporting that the firm has partnered with Citadel Securities to back a group launching a new national stock exchange in Texas.
The group is reportedly launching the Texas Stock Exchange (TXSE) in response to what they see as onerous regulation at the New York Stock Exchange and Nasdaq. They are looking to capitalize on the discontent many have with the increasing compliance costs at Nasdaq and NYSE, and newer rules that many consider “woke,” like the one setting targets for board diversity at Nasdaq.
TXSE has raised approximately $120 million from individuals and large investment firms, said James Lee, the firm’s CEO, and plans to file registration documents with the Securities and Exchange Commission (SEC) later this year. Backers have already pledged to offer a more CEO-friendly environment.
The exchange is aiming to start facilitating trades in 2025 and host its first listing in 2026.
Recent years have seen a significant shift in the U.S. corporate landscape after dozens of companies utilized the opportunity offered by the COVID-19 pandemic to relocate to states with more favorable regulatory and taxation policies.
Texas and New York rank second in terms of the number of Fortune 500 companies, behind California. Goldman Sachs is one of the newest residents of Texas, breaking ground on a Dallas campus in 2023 that can accommodate more than 5,000 employees.
“Dallas has become one of, if not the most, dominant financial centers in the country, if not the world,” Lee said. He added that the exchange will offer an “anti-woke,” apolitical trading experience and leave efforts to transform society to other platforms.
Lee said TXSE will operate entirely electronically, but will also have a physical presence in downtown Dallas. They plan to compete for primary and dual listings and also hope to entice exchange-traded products to list on its platform.
The effort to launch is expected to face challenges as NYSE and Nasdaq dominate U.S. corporate stock listings, as evidenced by the struggles IEX and Cboe Global Markets have had in gaining traction in the marketplace.
After decades of exchange consolidation, where dozens of regional platforms outside of New York either shut down or were acquired by larger players, the sector now appears to be entering a decentralization phase. The Long-Term Stock Exchange was approved by the SEC in 2019 but has thus far struggled to gain a foothold and only has two listings.
The main struggles for new exchanges are attracting liquidity and boosting trading volumes, as traders prefer to operate on platforms with healthy order books. TXSE hopes its backers will help overcome this challenge.
Citadel Securities is one of the world’s biggest electronic trading firms while BlackRock is the world’s largest asset manager, and the pair have a history of backing new exchanges. In 2020, Citadel Securities helped found The Members Exchange (MEMX), and BlackRock has been one of its principal investors. MEMX currently handles between 2% and 3% of the stock market’s volume, according to Cboe data.
