It looks like that long-rumored Dallas stock exchange is finally becoming a reality.
A new stock exchange headquartered in Dallas will launch next year aimed at competing with New York City’s exchanges, whose rules and regulations some companies have found onerous.
TXSE Group Inc. is founded and operated by James Lee, who says the company has already raised $120 million for the project — the largest backers of which are BlackRock and Citadel Securities.
BlackRock is a surprising name to be investing in a major initiative in Texas. After all, BlackRock’s previous headlines have been about various Texas retirement funds divesting from BlackRock over the company’s leftwing “Environmental Social Governance (ESG)” investing policies and their hostility to the oil and gas industry. Indeed, BlackRock CEO Larry Fink was a poster boy for ESG, but seems to have had at least a partial change of heart over ESG, saying he’s “ashamed” to use the term anymore, instead being less hostile to fossil fuels and supporting a strategy of “transition investing” in decarbonization technologies. (Maybe getting their stock downgraded over ESG had something to do with that.) Stefan Padfield says “Fink has apparently simply replaced ESG with ‘conscious capitalism,’ which suggests nothing much has really changed given that ‘ESG is conscientious capitalism in practice.’ He also notes that BlackRock’s stock price has under-performed the S&P 500 over the last 12 months.
The last time we looked into Citadel Securities was because they had apparently been caught with their hands in the GameStop naked shorts cookie jar at the same time they were telling trading platform (and investment recipient) Robinhood to stop allowing retail customers to buy GameStop.
Back to TXSE:
The plan was first reported by the Wall Street Journal. TXSE Group intends to register with the Securities and Exchange Commission (SEC) later this year. It will operate virtually but also eventually establish a physical presence in Dallas.
“Changes in equities trading markets are driving more volume to exchanges and more choices for issuers and sponsors,” Lee said in a press release.
“TXSE will ultimately create more competition around quote activity, liquidity and transparency, resulting in more consistent and reliable markets that benefit investors, global issuers and liquidity providers alike.”
Lee added, “Texas and the other states in the southeast quadrant have become economic powerhouses. 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.”
TXSE sees Nasdaq’s and NYSE’s approaches to compliance and non-financial regulations, such as diversity targets, as heavy-handed and onerous.
“BlackRock is proud to be a founding investor in the Texas Stock Exchange to increase liquidity and improve market efficiency for BlackRock’s clients and other investors in the U.S. capital markets,” BlackRock Vice Chairman Mark McCombe told The Texan in a statement.
“TXSE is well positioned to capitalize on the Texas economy and strength of the state’s business environment. We look forward to engaging with the other investors on the benefits of the TXSE’s unique value proposition.”
This follows other similarly aimed projects that BlackRock and others have partaken in over the last decade — a list that includes things like Members Exchange, RFQ Hub, and Luminex Trading. Given the state’s growth and regulatory posture, those backing this new project see a unique investment opportunity.
This states the obvious: Texas has a pro-business, pro-growth regulatory environment, while New York (city and state) has a hostile, anti-growth regulatory environment.
No points for guessing which political parties control which state.
Not mentioned, but a distinct possibility, is that many big business owners see the Trump kangaroo court conviction as a potential threat to themselves. If Democrats are willing to use a weaponized judiciary to go after their political enemies, the law be damned, then who might be next? A presence in New York, even only a listing on the New York stock exchange, may now be perceived as a much bigger potential liability than it was. With companies moving their physical presence from failing blue states like New York and California to Texas, it make a great deal of sense to do the same in as many legal venues as possible.