Ya’ll Ready? Here Comes the Texas Stock Exchange!
Texans have long been known for their larger-than-life attitudes and a penchant for bragging. The saying "everything is bigger in Texas" reflects not just the size of their cowboy hats and larger-than-life personalities but also the state's vast geographical expanse and booming population. With a total area of 268,820 square miles, Texas is second only to Alaska in size, but far surpasses Alaska in population with over 30.2 million people. Cities like Dallas, Houston, and San Antonio rank among the top 10 most populous in the US, underscoring its significant demographic weight. The state's economy too is impressive. Valued at approximately $2.4 trillion according to Texas Governor Greg Abbott, it rivals that of entire nations such as India, showcasing its substantial economic clout.
In a bold move to capitalize on this economic might, the TXSE Group announced yesterday the establishment of the Texas Stock Exchange (TXSE), set to be headquartered in Dallas. Backed by financial giants like BlackRock and Citadel Securities, along with over two dozen other investors, the exchange has already raised $120 million and plans to file with the SEC to commence trading in 2026. In today's nationalized and mostly online trading environment, does the US, and for that matter, the world, need another stock exchange?
Proponents argue that the Texas Stock Exchange will inject much-needed competition into the market, benefiting businesses and investors alike. With numerous public companies headquartered in Texas (California recently reclaimed the top spot as the state with the most Fortune 500 companies—a title previously held by Texas), the TXSE might find a ready pool of local companies eager to participate. However, to rival established giants like the NYSE and Nasdaq, the TXSE will need to attract significant trade volumes and offer competitive advantages.
The concept of a regional stock exchange isn’t a novel idea but part of a historical cycle. Regional exchanges have seen periods of prominence and decline throughout history. The Boston, Chicago, and Philadelphia exchanges once thrived before being absorbed into larger entities like the NYSE and Nasdaq. The establishment of the Texas Stock Exchange marks a resurgence in this cyclical trend, aiming to provide localized opportunities and competition in the national marketplace. Supporters claim that it will offer a more business-friendly environment with fewer regulations and lower costs, potentially appealing to CEOs looking for alternatives to the strict requirements of larger exchanges.
The context for this new venture includes the fluctuating fortunes of the IPO market. While some high-profile IPOs, like Arm, Reddit, and Birkenstock made headlines this year, the performance of small-cap IPOs is still concerning. Executive VP of OTC Markets Group Jason Paltrowitz, in his piece "Lawful but Awful," highlighted troubling trends among small and micro-cap IPOs, many of which fail to meet ongoing exchange standards and are delisted within a few years. This trend suggests a need for exchanges that better align with the financial realities of smaller companies but, can the Texas Stock Exchange meet their needs?
Its success will hinge on its ability to offer a robust, efficient trading platform and attract a diverse range of listings. If it can leverage Texas's economic strengths and address the pitfalls that have plagued other regional exchanges, the TXSE could become a formidable new player in the financial markets, adding a new dimension to Texas's "bigger is better" ethos.
