TXSE ‘upstart’ stock exchange may challenge crypto-friendly.

The United States is politically and culturally divided into “red states” and “blue states,” so why should stock exchanges be any different?

The Wall Street Journal reports that rumors of a “startup, ‘anti-enable'” stock exchange launched in Texas have been circulating for months — and recently, the rumors have come true.

TXSE Group announced plans on June 5 to launch its headquarters on the Texas Stock Exchange (TXSE) in Dallas. Importantly, the venture has already raised $120 million in capital from BlackRock and Citadel Securities, among others.

It is a bold initiative and immediately raised many questions. By market capitalization, were the New York “duopoly” of New York and the Nasdaq, the two largest stock exchanges, ripe for disruption?

Was this development part of a “shifting corporate landscape” toward states with more favorable regulatory and tax policies, as the WSJ suggested?

TXSE initially seeks to attract capital-seeking companies in the southeastern United States, including Texas, Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, Oklahoma, South Carolina and Tennessee. But do startups in that region need their own stock exchange?

And what about the emerging blockchain and cryptocurrency industry? Wasn't this good news: A “launched” stock exchange seemingly tailor-made for the insurgent crypto sector?

Will it have an impact?

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“Is it news? Yes. Is it fun? Yes, Larry Tabb, head of market structure research at Bloomberg Intelligence, told Cointelegraph.

“But will it have an effect?” Probably not. “It's a tough row to crack in Texas,” Tabb predicted.

“There are costs for companies moving out of New York,” Owen Lau, senior analyst at Oppenheimer & Company, told Cointelegraph. TXSE has taken the first steps to appeal to companies for specific themes and specific regions, but “it remains questionable how much liquidity they can build and how many companies will eventually list there.”

Others think the New York exchanges could benefit from some competition. “This is a classic example of the NYSE and Nasdaq having so much power, refusing to innovate and using regulatory capture to maintain their duality,” said Leigh Drogan, general partner and chief investment officer at institutional firm Starkiller Capital. Investment management firm, said Cointelegraph.

For that reason, it makes sense for big players like Citadel and BlackRock to back a new exchange “to crowd out those two players and force innovation wherever it's available,” Drogen added.

“We know [BlackRock CEO] Larry Fink supports the token idea. The NYSE and Nasdaq will not, and they will use their regulatory framework to slow down crypto,” said Drogen.

“Most of the world's leading exchanges, including London, Tokyo, Zurich and other cities, have announced that they will upgrade to digital exchanges with native digital assets – we expect Texas to do the same,” said Matthew Le Merle, co-founder. Founder and Managing Partner at Blockchain Coinvestors told Cointelegraph.

“Texas is one of the most innovative and supportive digital asset states in America, and it's only natural for a new stock exchange to launch with the newest technologies and support digital assets from day one,” added Le Merle. .

Elsewhere, BlackRock has been criticized for its environmental, social and governance investment initiatives, which some consider too “active”.

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Supporting the Texas exchange could help the world's largest asset manager improve its image in Texas, Tabb suggested. Meanwhile, Citadel CEO Ken Griffin supported the Republican Party; Two years ago, Citadel moved its headquarters from the blue state of Illinois to the red state of Florida.

That said, even a Texas-based stock exchange needs approval from the US Securities and Exchange Commission (SEC), and “it doesn't matter if the SEC doesn't bless crypto” where the exchange is based, Tabb said. At least from a crypto-spec perspective.

Moreover, among companies that sell their shares to the public, the first priority is always the market price. It's not about scoring political or cultural points. Tab said:

“Can you get high? [price-earnings] More for their new stock listing on NYSE, with 200 years of history, or Nasdaq, with 50 years, than Texas? Yes, probably. “

By this logic, the Texas location probably won't sway a blockchain or crypto firm looking to go public. He still follows the money.

“Other exchanges have tried, but most have not achieved what they originally set out to do,” Lau said of trying to break the New York “duopoly” on the stock exchange. Trading is already a crowded place, and building meaningful liquidity is becoming increasingly difficult. And specifically for stock listings, he added:

There are things associated with listing on the NYSE or Nasdaq, such as pride, brand name and even index valuation. You might miss it by listing other places.

Still, given the hot political heat in the US, it's hard to ignore this blue-state/red-state aspect.

Bulent Thamel, an economics professor at the University of Texas at San Antonio, told The Texas Standard that the current stock exchanges have been imposing tougher regulatory mandates on companies lately. One such mandate is a rule change that requires Nasdaq-listed companies to “meet certain diversity requirements on their Nasdaq-listed boards.”

This, along with other complaints such as high transaction fees, has prompted a sort of “backlash” and a search for alternative exchanges. “That's why I think those big companies would back such a project with a significant amount of money,” Temel said, referring to the BlackRock and Citadel investments.

Will we soon be talking about “red state” stock exchanges and “blue state” stock exchanges?

“I don't think it's a good idea to have a ‘red state' and ‘blue state' stock exchange,” Lau said. “I'm not sure how that idea will attract new companies to the United States.”

Maybe a new Texas stock exchange will encourage more crypto firms to go public, though?

“I don't see anything concrete about the attraction to the crypto and blockchain industry,” Lau continued. We will see how they improve in the future.

Drogen, on the other hand, does not appear to be breaking the red state/blue status quo when it comes to fair-trade marketplaces. “I don't really support the culture war issue because it's a bit of a red herring, and the real story is more important.”

He sees what TXSE is doing as a “rational move” to erode the power of the NYSE/Nasdaq because it “doesn't have the innovator's dilemma of adopting more efficient forms of trading,” where it holds the most power. The players are not interested in creating something new.

Moreover, if a crypto firm wants to demonstrate its liberal or anti-activist credentials, there are other ways to do so, Tab pointed out. For example, you can apply for secondary listing on TXSE. This may be done at a fraction of the NYSE's $300,000 per share initial listing fee. Their main listing may still be one of the New York exchanges, it is estimated.

Will Texas Exchange Succeed?

Overall, it's hard to see how much more competition in the US stock exchange sector would be bad for crypto firms looking to sell their company's equity to the public.

“BlackRock CEO Larry Fink is clear in describing the benefits of digital assets on blockchain railroads,” Le Merle explained. “We expect BlackRock's support for the new Texas exchange to increase its focus on blockchain technology and native digitized assets.”

Elsewhere, TXSE CEO James Lee told the Dallas Morning News: “Our goal is to be the number three registry in the United States.

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When Cointelegraph contacted TXSE, the company referred us to a similar story from the Dallas Morning News, which is comparable to the crypto-firm's details. The general impression was that TXSE would focus on building the “critical mass”, at least initially.

Will the new exchange succeed?

“Challenging the NYSE and Nasdaq? No,” commented Tabb.

Will they do better than the other 18 or so stock exchanges that operate or will soon operate in the United States? Maybe Tabb admits.

Still, any crypto startup — or any other fast-growing U.S. company, for that matter — looking to get a $1 billion valuation for their public shares will still have to go to the NYSE or Nasdaq to have a chance of happening, at least for the foreseeable future, Tab suggested.