Texas is looking to challenge Wall Street with the formation of a new national stock exchange based in Dallas. Backed by investors with $120 million in funding, the TXSE Group plans to file for registration with the US Securities and Exchange Commission. CEO James Lee stated that Texas and the southeast quadrant have become economic powerhouses, creating an opportune time to build a major, national stock exchange. The group hopes to benefit from the large number of private equity-sponsored companies in the region that may want to go public, with plans to officially launch the exchange in 2026.
The number of public companies in America has decreased significantly since the 1990s, with over 50% less companies on US exchanges compared to 1996. Factors such as reporting requirements, costly regulations, heightened public scrutiny, and the pressure of quarterly earnings have driven companies away from public markets. Private equity-backed firms in the US now outnumber publicly held companies by five times, with the trend of companies staying private growing over the years. JPMorgan Chase CEO Jamie Dimon has raised concern over this trend, questioning whether it is the desired outcome.
The TXSE Group aims to provide an alternative for companies seeking to go public, with a focus on relieving some of the burdens associated with public markets. The group hopes to offer stability and predictability around listing standards and associated costs, while expanding access to US capital markets for all investors. While the most popular exchanges in the US are located in New York City, there are about 13 stock exchanges across the country, including in Philadelphia and Miami. The new exchange would primarily list businesses in Texas and the southeast quadrant of the United States.
The trend of companies staying private has been driven by the ability to avoid regulatory requirements and focus on long-term strategic plans. Private companies can avoid the burden and cost of regulations, allowing them to concentrate on their long-term goals. Economists at Wells Fargo note that the average US technology firm stayed private for longer periods in 2019 compared to 1999, indicating a shift towards remaining private instead of transitioning to public markets. This trend has sparked concern among industry leaders like Jamie Dimon, who question the implications of fewer companies going public.
The TXSE Group’s plans to launch a national stock exchange in Texas come at a time when changes in the equity markets present an opportunity for greater alignment and competition. Corporate issuers and exchange-traded product sponsors are seeking stability and predictability in listing standards and associated costs, which the group aims to provide. By expanding access to US capital markets and offering greater alignment for public companies and those seeking access to public capital, the exchange hopes to address the changing landscape of public markets. With backing from investors and plans to file for registration with the SEC, the TXSE Group is positioning itself to challenge the dominance of Wall Street in the financial world.
