BlackRock and Citadel Securities last week announced a plan to deliver one of the biggest shake-ups to the world of finance in some time: They intend to compete with the stock market duopoly of NYSE and Nasdaq by launching the Texas Stock Exchange, which will have a physical presence in downtown Dallas and is aimed at CEOs weary of the costs and regulation that go with listing in New York. The new exchange, TXSE, plans to host its first trades next year and attract its first listing in 2026.
The news gave rise to a very clever headline—“All my indexes live in Texas” (George Strait reference here)—and also some Texas-sized boasting. The CEO of the new venture declared that the time is right for a major stock exchange in the Lone Star state, in part because “Dallas has become one of, if not the most, dominant financial centers in the country, if not the world."
Oh really? If Dallas is now the most dominant financial center in the world, it will come as news to the hundreds of thousands of people who work in banking and related fields on Wall Street and in midtown Manhattan. I don't buy it. Places are forever claiming they will usurp Hollywood for film or Silicon Valley for tech—but it never happens, and nor will Texas elbow out New York when it comes to finance. The reason is the same in all three cases: An ecosystem of people and resources has emerged in these centers that can't be up and moved the same way you would ship an auto factory down south.
TXSE's plan to replace New York as top finance dog is also a long shot in light of recent history. Since 2000, a series of other upstart exchanges have burst on the scene with grand plans to steal NYSE and Nasdaq's customer base. The most famous of these is IEX, which got the Michael Lewis treatment in Flash Boys for its founders' attempts to undercut the edge of high-frequency traders. Despite plenty of hype, trading on IEX and "other" U.S. stock exchanges today accounts for just 6% of all volume. As for new listings, some CEOs may gripe about NYSE and Nasdaq but, when push comes to shove, they always choose those two for their initial public offering.
If you want to make the bull case for Dallas muscling in on the Empire State's stock exchange business, you can point out that TXSE has the backing of two of the richest and most powerful firms in finance. Meanwhile, some CEOs are indeed chafing at rules imposed by NYSE and Nasdaq, especially when it comes to board diversity. And finally, the New York exchanges have not shown a knack for innovation, and instead behaved like the bloated duopoly they are—consider NYSE's foray into crypto with Bakkt, its digital asset unit that has raised hundreds of millions of dollars but is being run into the ground.
Some competition would do everyone good. But will CEOs of major companies be ringing the opening bell in Dallas? I'll believe it when I see it.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
