Just as I have, I’m sure many of our readers have been following the news that a new Texas stock exchange is vying to compete with New York’s dominance of new listings.
For one – and not that I don’t enjoy visiting New York for our various events – the prospect of holding an IR Magazine Awards ceremony in Dallas one year definitely appeals, particularly if it gives me the option to wear a bolo tie and a 10-gallon hat for the occasion.
Spearheaded by the TXSE Group, the Texas Stock Exchange (TXSE) says it will apply for approval from the SEC to become a new hub for US-listed companies, having attracted $120 mn in funding from investors including BlackRock and Citadel Securities. The group says issuers are ‘demanding more stability and predictability around listing standards and associated costs.’
It makes sense for the Lone Star State to be a staging ground for listings: Texas is home to more Fortune 500 firms than any other US state. And potential shareholders would love to see the US IPO pipeline – which appears a little dry at present – to become a little more active.
But investors and other market participants have given TXSE’s proposals a lukewarm reception.
For one, many have questioned any operator’s ability to bust the current New York duopoly on new listings, despite there being 24 regulated US securities exchanges currently in the mix. Among those, little headway has been made: the San Francisco-based Long-Term Stock Exchange, which launched in 2020 with the express aim of attracting long-term investors, has welcomed two companies so far.
Others are skeptical about TXSE’s intention to cut red tape – and regulatory costs – for listed companies. James Lee, the exchange’s founder and chief executive, says he wants to ‘create more competition around quote activity, liquidity and transparency, resulting in more consistent and reliable markets.’
Some investors are wary about listing standards being relaxed. ‘Great companies from around the world list on the NYSE and Nasdaq because they know it will help generate investor interest,’ Tyler Gellasch, president of the Healthy Markets Association, told the Financial Times this week. He also noted that companies had complained about onerous listing standards ‘for decades. It’s easy to see why companies want lower and friendlier listing standards, but why would investors?’
Dennis Kelleher, president of financial reform advocacy group Better Markets, echoes the sentiment: ‘Chief executives already have too many friends tilting the playing field to their favor; investors need more friends if the US is to continue to have the deepest, most liquid markets in the world.’
Whether or not TXSE will succeed is – as pointed out – far more in the hands of investors than issuers, after all. But I feel as though its operators need to offer a completely thought-out solution if they are to pose a serious threat to the New York exchanges.
What do you think? Can a Texas exchange be a credible alternative? Let us know, either on LinkedIn, or via email at [email protected].
