The Lone Star State also ranks second after California in the number of Fortune 500 company headquarters and will catch up with New York in 2024.

Now some investors in the state want that economic weight and what they see as a business-friendly climate to be reflected in a new Texas stock exchange. The Dallas-based exchange, the TXSE, would be a fully electronic national securities exchange, and its backers plan to register it with the U.S. Securities and Exchange Commission sometime in 2024.

Most of the sources consulted for this article welcomed the competition that the TXSE could offer to established exchanges such as the New York Stock Exchange and Nasdaq.

“We are always in favor of competition because it makes everyone better,” said JJ Kinahan, CEO of IG North America, the parent company of online broker tastytrade, of which he is president. “If TXSE comes out with an interesting offering and can help improve our customers’ experience, we welcome that.”

Lower costs in volatility

Recent market volatility could also help make the proposed exchange more attractive to investors, as it could offer lower costs and less burdensome listing standards than established competitors.

“While these major exchanges may view TXSE as a new competitor, current market volatility could make TXSE an attractive option for investors seeking stability and transparency,” said Robert Hodgins, CEO of fund manager Sandhill Investment Management.

Due to the expected lower costs, smaller companies could also benefit from the planned exchange.

Such smaller companies form the backbone of the U.S. economy and may need such a place to grow, sources said. By providing such a place, the new exchange could compete with the Toronto Stock Exchange and the TSX Venture Exchange in providing listing and financing opportunities for smaller domestic and foreign companies.

“Small and medium-sized enterprises make significant contributions to the overall economy, and many of today’s SMEs will be tomorrow’s market leaders,” said Michael Ashley Schulman, partner and chief investment officer of El Segundo, Calif.-based multi-family office firm Running Point Capital Advisors. “Therefore, establishing exchanges that encourage the development of small and medium-sized enterprises is fundamental to the healthy development of capital markets.”

The listing standards and compliance issues of the established stock exchanges have also been met with criticism by some – for example the so-called environmental, social and governance standards for companies on the NYSE.

It should be noted that there is no actual regulatory standard for such ESG criteria at the NYSE. The implementation of such governance is largely up to the companies themselves.

In an effort to increase diversity, Nasdaq requires companies to disclose the composition of their boards of directors, but companies will not be denied listing if they have not made sufficient progress in this area.

“TXSE will differentiate itself from other exchanges by offering lower regulatory costs and streamlined processes for listed companies through more lenient listing criteria compared to NYSE and Nasdaq,” Schulman said. “By presenting itself as a more flexible regulated alternative, TXSE should attract companies that are dissatisfied with the higher compliance costs and requirements of the other exchanges.”

Such actions by established exchanges are even called “social engineering” and violate the main reason for the existence of these companies – namely, as some say, to make money.

The establishment of the Texas stock exchange could throw such standards overboard, said David Materazzi, CEO of trading platform Galileo FX.

“The Texas Stock Exchange is not just a new player,” he said. “It is the battering ram that will tear down the outdated, monopolistic strongholds of the NYSE and Nasdaq.”

Anti-woke?

Materazzi went even further.

“The TXSE is here to strip away the layers of self-serving bureaucracy that have turned our so-called free markets into playgrounds for the elite,” he said. “Texas, with its no-nonsense, business-focused approach, is the perfect battleground for this revolution, where companies tired of submitting to ‘woke’ policies can find refuge.”

Such “woke” policies include the diverse board criteria at Nasdaq and the ESG incentives at NYSE, he added. These policies are at odds with the actual bottom line, which is making a profit, he said.

“This is not about business. This is about social engineering, with the SEC taking on the role of enforcer,” Materazzi said. “The TXSE is the lifeline for companies willing to break free from ‘woke’ mandates and get back to what really matters: growing profits.”

While TXSE supporters like Materazzi are betting that the planned exchange will be a sure-fire success, others are more skeptical.

There is little evidence in the past that such new exchanges can really change the status quo. For example, the Investors Exchange, founded in 2012, ceased its listing business seven years later.

The Texas Stock Exchange will need to have some unique selling points to entice companies to list on the exchange. While lower costs and perceived greater transparency could help to create such differentiation, it will be a difficult task, people familiar with the matter said.

“If the product is good, financial firms will use it, and if it doesn’t offer a differentiator, they will struggle,” said tastytrade’s Kinahan. “That’s the bottom line for every single company in the financial services industry.”

According to a press release from the TXSE Group in June, investors have raised around 120 million dollars for the planned stock exchange.

The heavyweights BlackRock and Citadel Securities are known to be among the financiers.

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“Corporate issuers and sponsors of exchange-traded products are demanding greater stability and predictability with regard to listing standards and associated costs,” the press release said. “TXSE intends to expand access to the U.S. capital markets for all investors, while providing greater access and coordination for publicly traded companies and those seeking access to public capital.”

Both the NYSE and Nasdaq declined to comment for this article.

Nick Thomas is a writer from Denver, Colorado.