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What to know about the new Texas Stock Exchange

Written by on June 6, 2024

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(NEW YORK) — Prominent backers have poured billions into a new Texas-based stock exchange that aims to attract companies with what it considers more business-friendly rules than those of the New York Stock Exchange and the Nasdaq.

The Texas Stock Exchange, which boasts funding from market maker Citadel Securities and asset manager BlackRock, intends to submit filing documents with the Securities and Exchange Commission later this year, TXSE Group, the company behind the exchange, said in a statement on Wednesday.

In recent years, some chief executives critical of what they deem to be “woke capitalism” have moved their companies to Texas, where more Fortune 500 companies are headquartered than any other state.

The new stock exchange could indicate an effort to attract conservative-minded firms, some experts told ABC News, but others downplayed the potential role of politics. In a statement, TXSE Group said that the exchange is apolitical.

TXSE Group acknowledged but declined to respond to ABC News’ request for comment.

Here’s what to know about the Texas Stock Exchange and what it says about the corporate culture wars

How will the Texas Stock Exchange work?

Headquartered in Dallas, the Texas Stock Exchange will be a fully electronic, national exchange that allows companies to list and trade on its platform.

The new exchange also plans to list exchange-traded products, a growing category of investment vehicles that allow customers to bet on a basket of assets. An exchange-traded bitcoin fund, for instance, allows clients to invest in bitcoin without holding the underlying cryptocurrency.

More than two dozen investors have backed the exchange with a total of more than $120 billion in funds, the TXSE Group said in a statement.

The exchange plans to attract businesses frustrated by stringent listing standards and the increasing costs they impose, the TXSE group added. For instance, the Nasdaq has imposed new rules setting targets for board diversity, the group 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,” James Lee, founder and CEO of TXSE Group, said in a statement.

The Wall Street Journal first reported details about the exchange.

Is this an ‘anti-woke’ exchange?

The announcement coincides with a conservative backlash against climate-friendly business practices as well as diversity, equity and inclusion policies derided by some critics as “woke capitalism.”

Analysts who spoke to ABC News differed over the extent to which the Texas Stock Exchange serves as a listing or trading alternative for conservative-leaning companies.

Some said ‘anti-woke’ branding would make up a key selling point for the new exchange, while others downplayed the role of politics for an exchange that promises lower compliance costs, as the Texas Stock Exchange does.

“Texas has a pretty clear message: ‘If you’re anti-woke, come here,’” Larry Tabb, head of market structure research at Bloomberg Intelligence, told ABC News.

As technological advances have taken stock exchanges online and lowered the baseline cost of offering high-quality services, the exchanges have sought alternative means of attracting customers, Tabb said. These days, the primary features that distinguish exchanges are listing rules, branding, and liquidity, he noted, but he emphasized branding.

When companies list with the New York Stock Exchange or Nasdaq, they draw on the credibility associated with those highly visible exchanges, Tabb added.

“They want to be affiliated with where you ring the bell or the exchange in Times Square,” Tabb said, noting that companies critical of sustainable practices or robust regulations may want an exchange affiliated with that point of view.

“The Texas exchange might draw energy companies; it might draw Tesla,” Tabb said, adding, “I’m not sure most companies want to be on the outer edge of the culture war issue.”

Christine Parlour, professor of finance and accounting at the University of California, Berkeley Haas School of Business, downplayed the role of politics in the Texas exchange. Instead, she said, most prospective clients are primarily focused on where they can find liquidity.

“All exchanges are money-making entities,” Parlour said. “At some point, people want to make money. So things can’t or won’t be completely driven by perception.”

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