Bye-Bye NYSE, Nasdaq? Wall Street Bigwigs BlackRock, Citadel Securities Lead Charge For New 'Apolitical,' 'CEO-Friendly' Stock Exchange In Texas

Wall Street’s biggest fund managers are reportedly preparing to challenge the dominance of the New York Stock Exchange — owned by Intercontinental Exchange, Inc. ICE — and Nasdaq NDAQ.

What Happened: A group led by BlackRock, Inc. BLK, the world’s largest asset manager, and hedge fund manager Kenneth Griffin‘s Citadel Securities, are developing plans for a new national stock exchange based in Texas, the Wall Street Journal reported on Tuesday.

The exchange, named the “Texas Stock Exchange” (TXSE), has reportedly secured $120 million in funding from individuals and large investment firms. It aims to file registration documents with the SEC later this year and begin trading in 2025, with the first company listing expected in 2026, according to TXSE CEO James Lee, who spoke with the Journal.

Ambitious Goals: TXSE will be a fully electronic exchange headquartered in downtown Dallas. Lee told the Journal the exchange will attract both initial public offerings (IPOs) and secondary listings, as well as exchange-traded products (ETPs).

The proposed exchange plans to leverage its prominent backers like BlackRock and Citadel Securities to attract trading volume. The report said it may also benefit from SEC rules requiring large brokers to connect to all exchanges.

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Motivations: The reported move comes amidst concerns over stringent regulatory requirements laid down by the NYSE and Nasdaq. Companies listing on these exchanges now face higher compliance costs and new rules, such as board diversity targets set by Nasdaq, the report added. TXSE reportedly aims to be more CEO-friendly and apolitical.

A Business-Friendly Hub: The choice of Texas as the exchange’s location reflects the state’s growing popularity among businesses due to its favorable regulatory and tax policies. Companies like Elon Musk‘s Tesla, which is seeking shareholder approval to move its headquarters from Delaware to Texas, exemplify this trend.

Texas now boasts more Fortune 500 companies than any other state, including Exxon Mobil, AT&T, and American Airlines, the report said.

Challenges Ahead: Establishing a new exchange will be a significant undertaking. Existing national exchanges like IEX and CBOE Global Markets haven’t been able to gain significant traction in stock listings, and several regional exchanges have been absorbed by the NYSE or Nasdaq over the past two decades.

Even established exchanges like the NYSE have faced challenges, with a recent technical glitch causing stock price fluctuations and trading halts. Despite these hurdles, TXSE’s arrival could potentially introduce competition and potentially lead to more favorable terms for companies listing on public exchanges.

Market Reaction: The Intercontinental Exchange, which owns the NYSE, closed Tuesday’s session up 0.83% at $134.76, while Nasdaq climbed 1.17% to $59.43, according to Benzinga Pro data.

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