Texas is to get a new, liberated stock exchange. Why not Manchester or Leeds too?
Matthew Lynn City columnist
It is certainly a bold move. TXSE Group last week announced it had $120m in backing from a group of giant financial institutions to launch a Texas Stock Exchange to rival New York. It will be based in Dallas, and the firm hopes to have it up and running by the end of this year, with trading open by 2026. It plans to have lower costs, especially for exchange-traded funds (ETFs), and fewer rules on issues such as the diversity of the board. If it gets all the necessary approvals it will be the first time Wall Street has had a real rival for a couple of generations.
Texas is the natural home for an alternative. The southern state is home to the most Fortune 500 companies in the US and more than 5,000 private-equity-sponsored companies. There are also more than 1,500 publicly traded companies in the region. By itself, Texas is the eighth-largest economy in the world, with a GDP of $2.4trn, larger than Russia, Canada, and Italy. Even if it just carved out a niche as the place to list locally based businesses, it could still be a substantial force. If Canada can support a stockmarket, why not Texas too?
It will be interesting to see whether the new exchange can carve out a space as a lighter-touch regulator as well. Just like London, and most European exchanges, Wall Street has been requiring companies to meet an increasing number of diversity and governance targets. And just like London, the response has been for fewer and fewer companies to list. From around 8,000 in the 1990s, only 4,000 are listed now, even though the US economy is much larger than it was 20 years ago. The Texas market may be an alternative for firms seeking freedom from all the rules that New York imposes.
The London market has even more absurd governance codes and regulations than New York does. Any company with a listing has to follow rules on who can be chairman, on the composition of its board, on the diversity of its directors, on its climate-change policies, and a dozen other standards and targets that have been mandated over the last two decades. The result? Companies have been giving up in even larger numbers. In 1996, there were 2,700 businesses in London, but by last year that number had fallen to 1,100, a fall of 60%. Major corporations such as CRH have shifted their listing to New York, many of the major initial public offerings, such as the chip designer
