Wall Street giants BlackRock Inc. and Citadel Securities are pouring money into the launch of a Texas stock exchange that plans to challenge the New York-based market in an effort to attract global companies.
The Dallas-based exchange, which has raised about $120 million to date, plans to file registration documents with the Securities and Exchange Commission later this year and begin operating as a national securities exchange, the TXSE said on Wednesday.
According to The Wall Street Journal, the TXSE is looking to attract exchange-traded product listings and combat new rules such as rising compliance costs for New York-based indexes and Nasdaq’s board diversity targets.
“Dallas has become one of the most powerful financial centers in the country, possibly the world,” TXSE Group CEO James Lee told The Wall Street Journal.
Lee pointed to the changing economic landscape in recent years, fueled by explosive population growth in the Sunbelt states of the southeastern United States.
Many companies are relocating from high-tax, high-regulation states, such as California and New York, to states that are considered more business-friendly, such as Texas and Florida.
Lee insisted that the new stock exchange would be apolitical.
“The TXSE will ultimately increase competition for price movement, liquidity and transparency, resulting in a more consistent and reliable market,” he added.
Home to ExxonMobil, AT&T, Tesla and American Airlines, the Lone Star State is home to more Fortune 500 companies than any other state.
Other companies that have relocated operations to Texas include Oracle, Charles Schwab, Hewlett-Packard, Caterpillar and NRG Energy.
Meanwhile, Apple is spending hundreds of millions of dollars to expand its Austin campus, and Goldman Sachs recently began construction on an 800,000 square foot work and play space in Dallas.
Citadel Securities, the market maker founded and run by hedge fund billionaire Ken Griffin, moved to Miami in 2022 from its previous headquarters in Chicago.
Texas has led the way among politically “red” states in restricting public pension funds’ dealings with BlackRock and other Wall Street firms that adopt environmental, social and governance (ESG) principles.
BlackRock has had a complicated relationship with Republican Texas officials in recent years.
The firm, a major investor in oil companies such as Exxon and which has resisted calls to divest its fossil fuel holdings, has faced accusations of “boycotting” certain industries after calling for greater emissions disclosure from portfolio companies.
In February, Chief Executive Larry Fink appeared in Houston with Texas Lt. Gov. Dan Patrick at an event to spur infrastructure investment, but the next month a state fund withdrew $8.5 billion from BlackRock management over the company’s energy policies.
“BlackRock is proud to be a founding investor in the Texas Stock Exchange to increase liquidity and improve market efficiency for our clients and other investors in the U.S. capital markets,” a company spokesman said.
Historically, the parent companies that run the NYSE and Nasdaq have absorbed smaller stock exchanges, such as those in Philadelphia, Chicago and Boston.
Earlier this year, a federal appeals court in New Orleans agreed to hear a challenge by conservative groups to Nasdaq over rules that require companies to disclose diversity figures on their boards of directors.
The rules, approved by the SEC in August 2021, require publicly traded companies to have at least one director who identifies as a woman, a member of a racial or ethnic minority, or an LGBTQ+ person, or to explain why they don’t have one.
To meet the rule, companies will generally need to have two diverse directors by 2026.
The rule prompted a lawsuit from conservative legal activists, including the Alliance for Fair Officer Hiring, a group founded by Edward Blum, who opposes affirmative action.
With post wire
