Beware the Texas advance on Wall Street
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Everything is bigger in Texas. The state’s $2.56tn economy ranks as the world’s eighth-largest, ahead of Russia, Canada and Italy. Its low taxes, light regulation and small-government policy has made it a magnet for people and companies looking to relocate. It now wants to lay claim to a new title: Wall Street of the South.
The Dallas-Fort Worth area has become a major hub for financial workers. Charles Schwab moved its headquarters from San Francisco in 2021. JPMorgan Chase, Goldman Sachs and Wells Fargo have all invested hundreds of millions of dollars in new satellite campuses in the area.
The Lone Star State could soon have its own stock exchange too. The TXSE Group, a start-up backed by BlackRock and Citadel Securities, wants to launch a rival stock exchange. The venue, called the Texas Stock Exchange (TXSE), still needs to apply for and be approved by regulators to run as an exchange. But it aims to challenge the dominance of the New York Stock Exchange and Nasdaq in the listing and trading of companies and funds.
That will be easier said than done. To be sure, Texas has one of the highest concentrations of Fortune 500 companies. It has tech in Austin, energy in Houston and West Texas, finance in Dallas and manufacturing and aerospace across the state. But attracting company listings or trading volumes is a very different challenge.
Plenty of upstart exchanges — including IEX — have tried to break the NYSE/Nasdaq duopoly with little success. Companies — even Texas-based ones — are unlikely to risk taking a high profile IPO to a little-known exchange. IEX threw in the towel on its corporate listing business in 2019. Another, the Long-Term Stock Exchange, has only two listings.
Moreover, traders go where the liquidity is. NYSE and Nasdaq offer the deepest markets, accounting for about 20 and 16 per cent of total US equity trading volume respectively. CBOE, the country’s third-largest exchange, has a 12 per cent market share. The others have less than 3 per cent.
TXSE will play on its Texan light-touch approach. The company said it wanted to offer more “predictability around listing standards and associated costs”. This is a clear swipe at a 2021 Nasdaq rule requiring board diversity disclosures by companies.
Yet while Texas talks up its laissez faire approach to business and small government philosophy, the state has also adopted strict stances around abortion and LGBT+ rights. Companies not adhering to certain political or cultural views have come under fire: notably Texas has banned its municipalities from doing business with banks that have ESG policies against fossil fuels and firearms. Companies should keep in mind that the culture wars cut both ways.
Comments