The Texas Stock Exchange (TXSE): Publicity Stunt or Genuine Challenge to the Capital Markets Duopoly?

The landscape of U.S. capital markets is poised for its most significant structural shift in decades. On September 30, 2025, TXSE Group Inc. formally announced that the U.S. Securities and Exchange Commission (SEC) had approved its Form 1 registration statement.^[1] This decision officially sanctioned the establishment of the Dallas-based Texas Stock Exchange (TXSE) as a national securities exchange, a designation that confers the same regulatory standing as the New York Stock Exchange (NYSE) and the Nasdaq Stock Market.^[2] The approval represents a pivotal moment, not merely for the exchange’s founders and backers, but for the entire ecosystem of corporate issuers, investors, and market intermediaries. Proponents have hailed the event as a milestone that restores meaningful competition to America’s public markets, with TXSE positioning itself as the “first fully integrated national securities exchange to receive SEC approval in decades”.^[3] This development is the culmination of a meticulous regulatory process and the capitalization of powerful economic and political currents reshaping the American business environment.

The Milestone Announcement

The SEC’s green light on September 30, 2025, marked the official birth of a new, formidable competitor to the longstanding duopoly of NYSE and Nasdaq.^[1] The announcement, made by TXSE’s parent company, TXSE Group Inc., was immediately framed as a landmark decision intended to inject new dynamism into the U.S. system of capital formation.^[3] James H. Lee, the founder and CEO of TXSE Group, declared, “Real competition for corporate listings in the United States has finally arrived”.^[4] This statement encapsulates the core ambition of the enterprise: to challenge the status quo and offer a compelling alternative to the incumbent exchanges, which it has explicitly targeted as its primary competitors.^[2] The exchange is scheduled to commence operations, including trading and listings for both corporate securities and Exchange-Traded Products (ETPs), in 2026, solidifying a clear timeline for its market entry.^[5] The approval is not just a procedural victory; it is a validation of a strategic vision that has been years in the making, backed by substantial capital and a consortium of the most influential players in modern finance.

The Regulatory Pathway: From Filing to Approval

The journey to becoming a registered national securities exchange was a formal and rigorous undertaking, governed by the provisions of the Securities Exchange Act of 1934. The process began on January 31, 2025, when Texas Stock Exchange LLC filed its initial Form 1 application with the SEC.^[6] This comprehensive filing detailed the proposed operational, governance, and regulatory framework of the new exchange.

As is common in such complex applications, the initial filing was followed by a period of review and refinement. TXSE submitted Amendment No. 1 on April 2, 2025, and Amendment No. 2 on July 29, 2025, to address SEC feedback and clarify aspects of its proposal.^[7] A crucial part of the SEC’s due diligence involved a public comment period, which invited feedback from all interested parties. The docket for TXSE’s application attracted a significant number of comment letters from a diverse and influential group of stakeholders.^[7] This public vetting process was not a mere formality; the SEC explicitly noted that it considered these comments in its final decision. The submissions included letters from prominent political officeholders, such as U.S. Senators Ted Cruz and John Cornyn, underscoring the political and economic significance of the exchange to the state of Texas.^[8] Letters also came from representatives of major market participants, including future investors like Fortress Investment Group and Citadel Securities, as well as from academics at institutions like the University of Texas at Austin.^[9] The nature of this engagement reveals that the TXSE’s approval was viewed through a lens broader than simple regulatory compliance; it was seen as a strategic initiative with the potential to reshape regional economic power and national market structure.

The SEC’s final approval was predicated on a core finding: that the proposed rules of the TXSE are consistent with the requirements of the Securities Exchange Act of 1934.^[10] This foundational piece of U.S. securities law requires, among other things, that an exchange’s rules be structured to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to provide for the fair representation of its members in the selection of its directors and administration of its affairs.^[10] The SEC’s affirmative finding signifies that TXSE’s proposed architecture met this high legal and regulatory standard.

The Scope of Approval: A Fully Integrated Platform

The authority granted by the SEC is comprehensive, enabling TXSE to operate as a “fully integrated” exchange.^[2] This distinction is critical. Unlike smaller, more specialized trading venues that may focus only on transaction execution, TXSE is approved to offer a complete suite of services that puts it in direct competition with the full-service models of NYSE and Nasdaq. The scope of its operations will encompass the entire lifecycle of a public security, including establishing and enforcing listing standards for new issuers, operating a trading platform, and providing essential post-trade functions like clearing, settlement, and the dissemination of market data.^[2]

This integrated model is a key component of its strategy to be a complete alternative for corporate issuers and ETP sponsors.^[4] By controlling the entire value chain—from the initial listing decision to the daily trading and data services—TXSE can offer a cohesive and streamlined experience. The exchange has announced its intention to launch both trading and listing services in 2026, targeting a broad range of securities from the outset.^[5] This comprehensive operational mandate, secured through the SEC’s approval, provides the necessary foundation for TXSE to execute its ambitious plan to disrupt the established order of U.S. capital markets.

The viability of any new exchange rests on the soundness of its underlying architecture. The Texas Stock Exchange has been meticulously designed with a corporate, operational, and regulatory framework that balances modern efficiency with established legal and compliance principles. Its structure reveals a sophisticated approach, leveraging the strengths of different legal regimes and operational models to create a platform that is both innovative and resilient. A detailed examination of this blueprint—from its corporate domicile to its technological engine and its approach to self-regulation—is essential to understanding its strategic positioning and long-term prospects.

Corporate Structure: A Tale of Two Delawares

One of the most nuanced aspects of the TXSE’s architecture is its corporate structure, which presents a fascinating contrast between its public-facing identity and its legal foundation. Despite a marketing and strategic narrative heavily centered on the state of Texas and its burgeoning, business-friendly legal environment, the core entities of the exchange are domiciled in Delaware.^[11] Specifically, the exchange itself, Texas Stock Exchange LLC, is a Delaware limited liability company. It is, in turn, wholly owned by its parent, TXSE Group Inc., which is a Delaware corporation.^[11]

This choice, while seemingly contradictory to the exchange’s “Texas-first” branding, is a calculated and pragmatic decision rooted in legal and financial risk management. Delaware’s Court of Chancery and its vast, well-developed body of corporate case law are widely considered the gold standard for resolving complex corporate governance disputes in the United States. For the powerful institutional investors backing TXSE Group Inc.—entities like BlackRock, Citadel Securities, and Fortress—the legal certainty and predictability afforded by Delaware law are paramount for protecting their own substantial investment in the exchange’s parent company. This structure provides them with a familiar and reliable legal framework for matters concerning their rights as shareholders.

This creates a sophisticated dual-track strategy. Publicly, TXSE champions the new Texas business courts and the state’s legislative initiatives as a key reason for other companies to list on its exchange.^[12] It leverages the “Texas Thesis” to attract issuers. Internally, however, it relies on the established Delaware framework to protect its own corporate structure and its investors. This pragmatic separation of its external marketing from its internal risk mitigation demonstrates a deep understanding of the U.S. legal landscape. It allows TXSE to credibly promote the advantages of the Texas legal system to potential listing clients while simultaneously providing its own backers with the unparalleled legal protections of Delaware corporate law.

Operational Model: Fully Electronic, No Trading Floor

In its operational design, the TXSE fully embraces modern market structure. The exchange will be entirely electronic, forgoing the physical trading floor that, while iconic, represents a legacy model of exchange operation.^[13] This choice aligns it technologically with Nasdaq and distinguishes it from the hybrid model of the NYSE, which still maintains a floor for designated market makers and ceremonial functions.

The heart of the exchange will be a proprietary order matching engine, which TXSE has already completed.^[14] This system is built on state-of-the-art hardware and software designed to deliver the high-performance characteristics demanded by today’s algorithmic and high-frequency trading environment: low-latency execution, flexibility, and scalability.^[14] The trading mechanism itself will be a fully automated limit order book with a continuous matching function.^[15] Orders will be executed according to a strict price/time priority algorithm, a standard and transparent method for ensuring fair and orderly markets.^[16] By building a purely electronic platform, TXSE can operate with greater cost efficiency, reduce physical infrastructure overhead, and offer faster, more direct market access to its members, who will submit orders electronically from remote locations.^[15] This technological foundation is crucial for its ability to compete on speed, reliability, and cost.

The Regulatory Backstop: Partnership with FINRA

As a registered national securities exchange, the TXSE is designated as a Self-Regulatory Organization (SRO), which carries the responsibility for monitoring its markets and enforcing compliance with both its own rules and federal securities laws. However, building a full-scale, in-house regulatory and enforcement division is a massive and costly undertaking. To address this, TXSE has adopted a common and efficient model used by many modern exchanges: outsourcing key regulatory functions to the Financial Industry Regulatory Authority (FINRA).

A specific condition of the SEC’s approval mandates that TXSE enter into a Regulatory Services Agreement (RSA) with FINRA.^[17] Under the terms of this agreement, FINRA, which already serves as the primary regulator for virtually all broker-dealer firms in the U.S., will perform a range of critical oversight functions on behalf of TXSE. These services will include conducting investigations into potential rule violations, bringing disciplinary actions against member firms, and managing the associated hearing and appeals processes.^[18] This partnership allows TXSE to leverage FINRA’s extensive experience, established infrastructure, and economies of scale in market regulation. It ensures robust and independent oversight of its members from day one, satisfying the SEC’s requirements for market integrity without the need to replicate a regulatory apparatus that has taken FINRA decades to build. This strategic decision allows TXSE to focus its internal resources on its core commercial functions: technology, market operations, and attracting listings.

The launch of a new national securities exchange is an endeavor of immense financial and strategic complexity. While a sound operational and regulatory plan is essential, it is the backing of substantial capital and influential market participants that ultimately determines a new entrant’s credibility and potential for success. In this regard, the Texas Stock Exchange is launching from a position of unprecedented strength. An analysis of its financial foundation reveals not only a war chest sufficient to sustain a long-term challenge to the incumbents but, more importantly, a strategically assembled coalition of investors whose business interests are deeply aligned with the exchange’s success. This syndicate is arguably TXSE’s single most critical strategic asset.

Unprecedented Capitalization

The financial commitment behind TXSE is historic in scale. TXSE Group Inc., the exchange’s parent company, successfully closed its initial capital raise at $161 million.^[19] This figure, which was increased from a previously announced $120 million, establishes a new benchmark for a nascent exchange.^[20] According to statements from the company and reports citing its SEC filings, this funding level makes TXSE the “most well-capitalized equities exchange to ever be approved by the SEC” or to file a Form 1 registration.^[21]

This level of capitalization is significant for several reasons. First, it provides a long operational runway, allowing the exchange to absorb the substantial costs associated with technology, staffing, and marketing during its formative years without immediate pressure for profitability. Second, it signals to the market—including potential corporate listings and trading members—that TXSE is a serious, long-term venture, not a speculative or underfunded experiment. This financial strength builds confidence and credibility, which are essential currencies in the world of finance. The ability to not only meet but significantly exceed its initial fundraising targets demonstrates strong investor conviction in the exchange’s business model and leadership.

A Strategically Assembled Investor Syndicate

Far more revealing than the total capital raised is the composition of the investor group. The syndicate behind TXSE is not a random collection of financiers; it is a meticulously curated ecosystem of the most powerful and integral players in the U.S. capital markets. The group represents a vertical slice of the entire trading and investment lifecycle, creating a powerful network of aligned interests. The key categories of investors include:

• Institutional Asset Management: The participation of BlackRock, the world’s largest asset manager with trillions of dollars under its purview, is a cornerstone of the syndicate. BlackRock is not only a massive investor in public companies but also the leading issuer of Exchange-Traded Products (ETPs), a key target market for TXSE listings.^[22]
• Market Making and Liquidity Provision: The group includes several of the world’s most dominant market-making and proprietary trading firms, led by Citadel Securities. The participation of Citadel Securities, along with other high-frequency trading powerhouses like Jump Trading, Squarepoint, and Tower Research, is of paramount strategic importance.^[23] These firms are the primary source of liquidity in modern electronic markets.
• Retail Brokerage: The inclusion of Charles Schwab brings a direct link to a vast pool of retail investor order flow. As one of the largest brokerage firms in the country, Schwab’s involvement represents a significant potential channel for trading volume.^[24]
• Private Equity and Investment Firms: Backers such as Fortress Investment Group and Susquehanna Private Equity Investments represent the institutional investment community that takes companies public and actively trades in the secondary market.^[25]
• Prominent Texas Capital: Anchoring the exchange to its home state are influential Texas-based investors, including billionaires Kelcy Warren, CEO of Energy Transfer Partners, and Paul Foster, founder of Western Refining, as well as the Dell Family Office Management.^[26] Their involvement provides deep local business connections and reinforces the “Texas Thesis.”

This syndicate has been deliberately constructed to solve the classic “chicken-and-egg” problem that has doomed many aspiring exchanges. A new exchange needs liquidity to attract listings, but it needs listings to attract liquidity.^[18] TXSE’s investor base internalizes the solution to this dilemma. Citadel Securities and the other market makers can serve as dedicated liquidity providers for new listings from day one, ensuring tight bid-ask spreads and an orderly market. BlackRock’s involvement strongly implies a commitment to list some of its high-volume ETFs on the new exchange, providing an immediate source of trading activity. Charles Schwab’s participation creates the potential to direct a portion of its massive retail order flow to TXSE. This structure is not merely a funding mechanism; it is a pre-built business ecosystem designed to manufacture the critical mass of liquidity necessary to achieve escape velocity and establish itself as a viable trading venue.

The Board and Leadership

The governance structure of TXSE Group Inc. reflects the strategic composition of its investor base. The board of directors and its advisors include representatives and observers from its key financial backers, ensuring that the exchange’s strategic direction remains aligned with the interests of the firms that are most critical to its success. For instance, Alex Bussandri, the global head of strategy at Citadel Securities, sits on the board, while Mark McCombe, a Vice Chairman at BlackRock, serves as a board observer.^[27] This direct involvement of senior leaders from its most important strategic partners ensures that decisions regarding market structure, technology, and listing strategy are made with the input of the very entities that will provide the liquidity and listings the exchange needs to thrive.

The creation of the Texas Stock Exchange is not an isolated corporate event; it is the logical culmination of powerful, long-term economic and demographic trends that have transformed Texas into a national powerhouse. The viability and strategic rationale for the exchange are deeply rooted in what can be termed the “Texas Thesis”: the idea that the state’s unique combination of economic dynamism, a deliberately cultivated pro-business climate, and the emergence of a major financial hub creates a fertile and sustainable environment for a new national capital market. TXSE is not merely located in Texas; its entire business case is predicated on leveraging the state’s formidable economic and political capital to achieve national significance.

The Economic Powerhouse

At the core of the Texas Thesis is the sheer scale and growth of the state’s economy. Texas functions as an economic entity on a global scale, providing a deep and diverse foundation for a new exchange. The state’s gross domestic product (GDP) now stands at approximately $2.7 trillion, an output that would rank as the 8th largest economy in the world if Texas were an independent nation, ahead of countries like Canada and Russia.^[28][29]

This economic might is broad-based. Texas leads the nation in total exports, with revenues exceeding $440 billion in 2023, more than double that of the next closest state.^[30] It has consistently been a leader in job creation and is experiencing rapid population growth, fueled by both domestic and international migration.^[31] Crucially for a stock exchange, Texas has become the undisputed leader in attracting corporate headquarters. With 54 Fortune 500 companies now based in the state, Texas has surpassed all others, including New York, creating a large, localized, and accessible pool of potential blue-chip listings.^[32] This concentration of major corporations provides a natural and immediate target market for TXSE’s listing services, reducing the need to solely rely on attracting companies from other regions.

A Pro-Business Climate

The second pillar of the Texas Thesis is the state’s meticulously crafted political and regulatory environment. For decades, state leadership has pursued a consistent strategy of creating what it terms a “business-friendly climate” designed to attract investment and corporate relocations.^[24]

The cornerstones of this policy are structural and deeply embedded in the state’s fiscal and legal systems. Texas is one of the few states with no corporate income tax and no personal income tax.^[33] This provides a powerful financial incentive for both companies and their employees, resulting in one of the lowest overall tax burdens in the country.^[34] Beyond taxation, the state has cultivated a reputation for having a predictable regulatory environment and has actively used incentives, such as the Texas Enterprise Fund, to close deals on major corporate relocations.^[35]

More recently, the state has taken legislative steps that seem tailor-made to support a new exchange and challenge established legal norms. In 2024, Texas authorized the creation of specialized business courts designed to handle complex corporate litigation, a direct move to compete with Delaware’s renowned Court of Chancery.^[36] Furthermore, the passage of Senate Bill 1057 in May 2025 provides a specific incentive for listing on a Texas-based exchange. The law permits any company listed on an exchange in Texas—regardless of where it is incorporated or headquartered—to establish higher thresholds for the submission of shareholder proposals.^[37] This is a direct appeal to corporate management teams who may feel burdened by the current shareholder activism landscape, offering them a tangible governance advantage for listing on TXSE.

The Rise of “Y’all Street”

The final component of the thesis is the physical concentration of financial infrastructure and talent in North Texas. The Dallas-Fort Worth metroplex has evolved into a legitimate financial center, often dubbed “Y’all Street,” that now rivals established hubs.^[45] By some measures, Dallas is now the second-largest employer of financial services workers in the United States, trailing only New York City.^[38]

This growth has been driven by a wave of major corporate relocations and expansions from the world’s leading financial institutions. Goldman Sachs is constructing a massive new $500 million campus, Charles Schwab relocated its headquarters to the area, and firms like Wells Fargo and Bank of America maintain a huge presence.^[39] This critical mass of financial expertise, technology, and capital creates a powerful network effect. It establishes a deep talent pool for the exchange to draw from and a local community of bankers, lawyers, and analysts who understand the capital markets. The incumbents have already been forced to react to this shift. In a clear defensive move against the upstart TXSE, the NYSE announced it was relocating one of its electronic exchanges from Chicago to Dallas and rebranding it as “NYSE Texas,” a tacit acknowledgment of the region’s growing importance.^[40] This convergence of economic power, political will, and physical infrastructure makes Dallas not just a plausible location, but arguably the most logical U.S. city for the launch of a new national exchange.

A central element of the Texas Stock Exchange’s strategy is its promise to offer a superior alternative for public companies. However, this positioning creates an apparent paradox. The exchange’s marketing narrative emphasizes a more “CEO-friendly” approach designed to alleviate regulatory burdens, yet the SEC’s approval was based on the finding that its rules are “substantially similar” to those of the existing exchanges.^[41] Resolving this paradox requires a granular analysis of the TXSE rulebook, comparing its quantitative listing standards and corporate governance requirements to those of the NYSE and Nasdaq. Such an examination reveals that while the core framework for governance is indeed aligned with established norms, TXSE has introduced subtle but significant structural differences designed to appeal to a specific segment of mid- and large-cap issuers.

The Marketing Pitch: A “CEO-Friendly” Alternative

From its inception, TXSE has positioned itself as a solution for corporations frustrated with the current listing environment. Its public messaging and the narrative surrounding its launch have consistently highlighted a goal of reducing the costs and complexities associated with being a public company.^[56] This pitch is aimed squarely at corporate leadership—CEOs, CFOs, and general counsels—who have voiced concerns about escalating compliance costs, rising listing fees, and what they perceive as increasingly prescriptive and politically influenced governance mandates from the incumbent exchanges.^[39]

A frequently cited example of such a mandate is Nasdaq’s board diversity rule, which requires listed companies to disclose board-level diversity statistics and either have, or explain why they do not have, a certain number of diverse directors.^[42] By signaling an intent to focus on core principles of shareholder value and avoid such specific social or political mandates, TXSE is marketing itself as a more predictable and business-focused venue.^[37] This “CEO-friendly” branding is a direct attempt to differentiate itself on philosophy and service, not just on technical specifications.

The Regulatory Reality: “Substantially Similar” Rules

The challenge for TXSE is that as a national securities exchange, it cannot simply create any rules it wishes. It must operate within the framework of the Securities Exchange Act of 1934, which is designed to protect investors and ensure market integrity. This legal reality was central to the SEC’s approval process. In its final order, the Commission made a crucial observation: “TXSE’s proposed initial and continuing listing standards for securities to be listed and traded on the Exchange are substantially similar to the current rules for the Nasdaq Global Select Market”.^[41]

The SEC’s logic was straightforward and pragmatic. Because the Commission had previously reviewed and approved the rules of Nasdaq and other exchanges, finding them to be consistent with federal securities laws, it could likewise conclude that TXSE’s similar rules also met the legal standard.^[41] This finding was likely instrumental in smoothing the path to approval, as it allowed the SEC to rely on established precedent. However, it also creates the central paradox: if the rules are largely the same, where is the tangible benefit for issuers that TXSE promises? The answer lies in the structural differences that exist alongside the similarities in core governance.

Dissecting the Differences

While the foundational principles of corporate governance—such as requiring a majority-independent board and fully independent audit, compensation, and nominating committees—are aligned with NYSE and Nasdaq standards, TXSE has engineered its listing framework with several key distinctions.^[40]

• Mandatory Pre-Application Review: One of the most significant procedural differences is that TXSE will require all prospective issuers to undergo a formal, confidential pre-application review.^[43] At NYSE and Nasdaq, this process is optional. By making it mandatory, TXSE aims to provide companies with greater clarity and certainty before they invest the significant time and resources required for a formal listing application. This front-loaded diligence could streamline the overall process and reduce the risk of late-stage complications.
• Single-Tier Structure: TXSE has chosen to operate as a single-tier exchange. Its listing standards are designed to attract established mid- and large-cap companies.^[44] This is a deliberate contrast to the multi-tier structures of its competitors. Nasdaq, for example, operates three tiers: the Global Select Market (with the highest standards), the Global Market, and the Capital Market (which has lower financial thresholds to accommodate smaller, emerging companies).^[45] By focusing on a single, higher-quality tier, TXSE is signaling its intent to be a venue for more mature companies, avoiding the reputational risk associated with the more speculative issuers that may list on lower tiers.
• Higher Minimum Bid Price: Consistent with its focus on more established companies, TXSE’s proposed rules mandate a minimum bid price of $4.00 per share for initial and continued listing.^[46] While this matches the requirement for the highest tiers of NYSE and Nasdaq, it is significantly higher than the $2.00 or $3.00 minimums for Nasdaq’s Capital Market.^[47][48] This higher floor is intended to attract more stable companies and may reduce the frequency with which listed companies need to resort to measures like reverse stock splits to maintain compliance.^[46]

The following table provides a direct, data-driven comparison of the key initial listing standards, illustrating both the similarities in governance and the important differences in structure and quantitative thresholds.

Table 1: Comparative Analysis of Initial Listing Standards: TXSE vs. Nasdaq Global Select Market vs. NYSE

Metric	Texas Stock Exchange (TXSE)	Nasdaq Global Select Market	New York Stock Exchange (NYSE)
Minimum Bid Price	$4.00[46]	$4.00[47]	$4.00[47]
Market Tiers	Single Tier (Mid- to Large-Cap Focus)[44]	Three Tiers (Global Select, Global, Capital)[45]	Single Tier (with variations for different company types)[29]
Pre-Application Review	Mandatory, Confidential[43]	Optional[43]	Optional[43]
Earnings Test	Aggregate pre-tax earnings of $12M over 3 years, with $2M in each of the two most recent years.[40]	Aggregate pre-tax earnings of $11M over 3 years, with positive income in the most recent year or two of the last three.	Aggregate pre-tax earnings of $10M-$12M over 3 years (depending on test).
Market Cap / Revenue Tests	Multiple tests, including one requiring $200M market cap.[40]	Multiple tests, including one requiring $160M market cap and another based on total assets/revenue.	Multiple tests, including one requiring $200M market cap.
Publicly Held Shares	At least 1.1 million	At least 1.25 million	At least 1.1 million
Market Value of Public Shares	At least $45 million	At least $45 million[55]	At least $40 million
Board Independence	Majority independent board; fully independent audit, compensation, and nominating committees. Phased compliance for IPOs.[40]	Majority independent board; fully independent audit, compensation, and nominating committees. Phased compliance for IPOs.[29]	Majority independent board; fully independent audit, compensation, and nominating committees. Phased compliance for IPOs.[29]

The history of financial markets is littered with the remnants of failed exchanges. The single greatest determinant of success or failure for a new trading venue is its ability to solve the profound challenge of liquidity. An exchange is, at its core, a network. Its value to any single participant is directly proportional to the number and activity of all other participants. This creates a powerful network effect that favors incumbents and presents a formidable barrier to entry for any challenger. The Texas Stock Exchange is entering a market dominated by the NYSE and Nasdaq, two of the deepest and most liquid pools of capital in the world. Its entire strategic framework—from its investor syndicate to its value proposition—is designed to overcome this fundamental obstacle and build a new center of gravity for trading in the U.S.

The Incumbency Advantage: A Formidable Duopoly

The NYSE and Nasdaq hold an effective duopoly over U.S. corporate stock listings, a position they have solidified over decades of operation.^[49] Their advantage is self-reinforcing. Because they are home to thousands of listed companies and handle trillions of dollars in trading volume, they attract a massive and diverse set of market participants, including institutional investors, retail brokers, and high-frequency trading firms. This deep, concentrated pool of liquidity ensures that buyers and sellers can transact efficiently with minimal price impact, which in turn makes these exchanges the most attractive venues for new companies to list their shares.^[18]

For a new entrant like TXSE, this presents a monumental challenge. Traders and their algorithms are programmed to route orders to the venues with the best prices and deepest liquidity, which are, by definition, the incumbent exchanges.^[39] Breaking this cycle requires a compelling reason for market participants to divert their order flow and for corporate issuers to take a chance on a new, unproven platform. This is the central problem that TXSE’s strategy must solve.

TXSE’s Value Proposition to Issuers

Recognizing that it cannot compete on day-one liquidity, TXSE’s strategy is to reframe the competition around a different set of values. It is making a direct appeal to corporate issuers by building a value proposition based on cost, service, and philosophical alignment. The key pillars of this argument are:

• Cost Reduction: A primary and tangible benefit TXSE aims to offer is a reduction in the all-in cost of being a public company. This includes not only the initial and annual listing fees but also the connectivity and market data fees that have become a significant expense for broker-dealers and a major source of revenue for the incumbent exchanges.^[50] By leveraging a modern, lean operational model, TXSE plans to be a more cost-effective alternative.^[56]
• Regulatory Alignment and Predictability: As detailed previously, TXSE is marketing itself as a “CEO-friendly” exchange that offers a more predictable regulatory environment. It aims to attract companies that are wary of the perceived “regulatory creep” at the existing exchanges and prefer a venue focused on core corporate governance and shareholder value principles.^[39]
• Regional Focus and Identity: The exchange is launching with a clear geographic strategy. Its initial efforts will target the nearly 1,000 publicly traded companies and the estimated 14,000 private equity-backed firms located in what it calls the “southeast quadrant” of the United States—a region stretching from Texas to the Carolinas.^[51] By cultivating a strong regional identity, TXSE hopes to become the default choice for companies in America’s fastest-growing economic corridor. To gain initial traction, the exchange has indicated that its early focus will be on attracting dual listings from companies that are already public on another exchange, providing them a way to associate with the Texas brand without the risk of a full transfer.^[52]

The Liquidity Engine: Activating the Investor Syndicate

The qualitative appeal to issuers is necessary but not sufficient. To solve the quantitative problem of liquidity, TXSE is leveraging its most potent strategic weapon: its founding investor syndicate. As analyzed in Section 3, this group was not assembled merely for its capital but for its functional role in the market. This coalition is the engine designed to provide the initial spark of liquidity.

The involvement of premier market makers like Citadel Securities, Jump Trading, and Tower Research is the most critical component of this strategy.^[23] These firms can act as the designated market makers for TXSE’s first listings, contractually obligated to provide continuous two-sided quotes. Their presence ensures that from the very first trade, there will be a liquid and orderly market with tight bid-ask spreads, mitigating the execution risk for other investors. Similarly, the backing of BlackRock, the world’s largest issuer of ETFs, creates a powerful potential pipeline for new listings.^[22] ETFs are typically high-volume products, and securing even a handful of popular BlackRock ETFs for primary or dual listing would generate a substantial and consistent stream of trading activity, attracting further participation. This strategic alignment is a direct and sophisticated attempt to manufacture the initial liquidity required to make the market viable and begin the process of breaking the incumbents’ gravitational pull.

The Risk of Fragmentation

While the introduction of a new, well-funded competitor is largely seen as a positive development for issuers, some market participants have raised a valid structural concern. The creation of another major trading venue could lead to increased market fragmentation.^[53] In the modern U.S. equity market, trades are already spread across more than a dozen exchanges and numerous off-exchange “dark pools.” Adding another significant venue could further complicate the landscape for broker-dealers, who must invest in the technology and connectivity to access all pools of liquidity to satisfy their best-execution obligations. While competition can drive down costs, excessive fragmentation can, in some cases, make it harder to find liquidity and can increase infrastructure costs for the industry as a whole. This is a structural trade-off that the market will have to navigate as TXSE comes online.

The approval and impending launch of the Texas Stock Exchange represent more than the creation of a new company; they signal a potential inflection point for the structure and competitive dynamics of U.S. capital markets. The success of this ambitious venture is far from guaranteed, as it faces the deeply entrenched network effects of the NYSE-Nasdaq duopoly. However, TXSE enters the fray as the most credible and well-equipped challenger in a generation. Its strategic outlook, and the implications of its entry, will be felt across the spectrum of market participants, from corporate boardrooms to trading desks.

Probability of Success: A Formidable but Well-Equipped Challenger

Assessing TXSE’s probability of success requires balancing the immense historical advantages of the incumbents against the unique strengths of the challenger. The primary hurdles are formidable: breaking the liquidity-begets-liquidity cycle and convincing thousands of corporate issuers and investors to embrace a new platform. The history of U.S. finance is replete with regional exchanges that were ultimately acquired or rendered irrelevant by the gravitational pull of New York.^[54]

However, several factors suggest that TXSE has a legitimate chance to defy this history. First is its unprecedented capitalization of $161 million, which provides the financial endurance to execute a long-term strategy.^[19] Second, and most critical, is its strategically engineered investor syndicate. The backing of liquidity providers like Citadel Securities and ETF issuers like BlackRock is a masterstroke that directly addresses the exchange’s primary existential threat.^[22] Third, TXSE is launching at a moment of powerful secular tailwinds: the continued economic and demographic shift to Texas and the U.S. Southeast, and a growing sentiment of “regulatory fatigue” among some corporate issuers.^[45] While success is not assured, TXSE is positioned with the capital, strategic alliances, and market timing to mount a serious and sustained challenge.

Implications for Corporate Issuers

For public companies and those contemplating an IPO, the emergence of TXSE fundamentally alters the strategic landscape of the listing decision.

• A Third Viable Option: For the first time in decades, companies will have a third, full-service national exchange to consider for a primary or dual listing. The decision-making calculus will become more complex. A company’s board will need to weigh the unparalleled brand recognition and deep liquidity of the NYSE and Nasdaq against the potential benefits offered by TXSE, which include potentially lower costs, a strong regional identity, and a perceived “CEO-friendly” governance philosophy.^[51] This choice will be particularly acute for companies headquartered in the Southeast, for whom a TXSE listing could offer powerful branding and alignment with the region’s economic narrative.
• Increased Competitive Leverage: Perhaps the most immediate and widespread impact for all public companies, regardless of where they are listed, will be increased leverage. The mere existence of a credible competitor in TXSE will likely force the incumbent exchanges to be more competitive on pricing and service.^[56] Companies will be able to use a potential or threatened move to TXSE as a bargaining chip when negotiating annual listing fees, data costs, and other services with NYSE and Nasdaq. This competitive pressure could lead to a market-wide reduction in the cost of being a public company.

Implications for Investors and Traders

The introduction of a new, significant trading venue will have direct consequences for the investment and trading community.

• New Investment Opportunities: A core part of TXSE’s mission is to reverse the decades-long decline in the number of U.S. public companies by making it more attractive and less burdensome to go and stay public.^[55] If successful, this could lead to a new wave of IPOs, particularly from growth companies in Texas and the surrounding region, providing investors with a new set of opportunities.^[51]
• Market Structure Evolution: Broker-dealers and proprietary trading firms will need to adapt their technological infrastructure and smart order routing logic to incorporate TXSE as a key execution venue. While this involves initial costs, the increased competition among exchanges for order flow could ultimately drive down transaction, connectivity, and market data fees across the industry.^[52] The risk of increased fragmentation remains a concern, but the potential for lower costs is a powerful countervailing benefit for intermediaries.

Long-Term Impact on U.S. Capital Markets

Looking beyond the immediate effects, the launch of the Texas Stock Exchange could have profound, long-term implications for the geography and structure of American finance.

• A Catalyst for Competition and Innovation: TXSE’s entry is poised to ignite a new era of competition in the market for exchange services. The defensive moves already made by NYSE and Nasdaq—both of which have significantly expanded their own presence in Dallas—demonstrate that the incumbents are taking the threat seriously.^[57] This heightened competition is likely to spur innovation in trading technology, market structure, and service offerings, ultimately benefiting both issuers and investors.^[51]
• The Validation of Regional Financial Hubs: If TXSE succeeds in establishing itself as a durable, top-tier exchange, it will validate the concept that a major national capital market can thrive outside of the New York-New Jersey corridor. This could serve as a blueprint for other burgeoning economic regions in the U.S., potentially leading to a more decentralized and resilient national market system over the long term.
• A New Chapter in the Exchange Wars: The battle for listings and liquidity is entering a new, geographically-focused phase. The establishment of TXSE, and the corresponding expansions of its rivals into Texas, marks the opening of a new front in the long-running competition between U.S. stock exchanges. The outcome of this contest will not only determine the fate of the Texas Stock Exchange itself but will also play a significant role in shaping the landscape of American capital formation for the foreseeable future.

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[1] On September 30, 2025, TXSE Group Inc. announced that the SEC had approved its Form 1 registration statement. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, https://www.txse.com/press-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange, https://www.prnewswire.com/news-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange-302571395.html, https://www.jdsupra.com/legalnews/sec-approves-txse-as-national-9814047/)

[2] The approval makes TXSE a recognized national securities exchange, similar in standing to the NYSE and Nasdaq. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, Vinson & Elkins)

[3] TXSE describes itself as the “first fully integrated national securities exchange to receive SEC approval in decades”. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, https://www.txse.com/press-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange, https://www.prnewswire.com/news-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange-302571395.html, InnovationMap)

[4] James H. Lee, founder and CEO of TXSE Group, stated, “Real competition for corporate listings in the United States has finally arrived”. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, https://www.txse.com/press-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange, https://www.prnewswire.com/news-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange-302571395.html)

[5] TXSE plans to launch trading and listings for corporate securities and ETPs in 2026. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, https://www.prnewswire.com/news-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange-302571395.html, InnovationMap, https://www.txse.com/solutions)

[6] The initial Form 1 application was filed with the SEC on January 31, 2025. (https://www.sec.gov/files/rules/other/2025/34-103604.pdf, https://www.federalregister.gov/documents/2025/04/10/2025-06116/texas-stock-exchange-llc-notice-of-filing-of-application-as-amended-for-registration-as-a-national, https://www.txse.com/press-releases/texas-stock-exchange-files-form-1-registration-to-operate-as-a-national-securities-exchange)

[7] Amendment No. 1 was submitted on April 2, 2025, and Amendment No. 2 on July 29, 2025. (https://www.sec.gov/files/rules/other/2025/34-103604.pdf)

[8] Comment letters were submitted by U.S. Senators Ted Cruz and John Cornyn. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, Vinson & Elkins)

[9] Comment letters were submitted by representatives of market participants, including Fortress Investment Group and Citadel Securities. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/)

[10] The SEC approved the application based on the finding that TXSE’s rules are consistent with the Securities Exchange Act of 1934. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, Vinson & Elkins)

[11] The Texas Stock Exchange LLC is a Delaware limited liability company, wholly owned by its parent, TXSE Group Inc., a Delaware corporation. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, Vinson & Elkins)

[12] Texas authorized the creation of specialized business courts, modeled after Delaware’s Court of Chancery, which are set to open on September 1, 2024. (Foley & Lardner LLP)

[13] TXSE will operate as a fully electronic exchange with no physical trading floor. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, Vinson & Elkins, https://www.bankingdive.com/news/dallas-texas-stock-exchange-blackrock-citadel-sec-nyse-120-million-raise/718089/)

[14] TXSE has completed its proprietary order matching engine and exchange platform. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, https://www.txse.com/press-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange, https://www.prnewswire.com/news-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange-302571395.html, InnovationMap)

[15] The exchange will operate a fully automated limit order book with a continuous matching function. (https://www.sec.gov/files/rules/other/2025/34-103604.pdf)

[16] Orders will be executed based on a price/time priority algorithm. (https://www.sec.gov/files/rules/other/2025/34-103604.pdf, https://www.federalregister.gov/documents/2025/04/10/2025-06116/texas-stock-exchange-llc-notice-of-filing-of-application-as-amended-for-registration-as-a-national)

[17] A condition of the SEC’s approval is that TXSE enters into a Regulatory Services Agreement (RSA) with FINRA. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, Vinson & Elkins)

[18] Under the RSA, FINRA will perform regulatory functions including investigations and disciplinary actions. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, Vinson & Elkins)

[19] TXSE Group Inc. closed its initial capital raise at $161 million. (https://www.txse.com/press-releases/texas-stock-exchange-files-form-1-registration-to-operate-as-a-national-securities-exchange, Insurance Journal)

[20] The initial capital raise was increased from a previously announced $120 million. (https://www.thetradenews.com/blackrock-and-citadel-securities-back-new-texas-based-challenger-exchange/, Insurance Journal, https://www.bankingdive.com/news/dallas-texas-stock-exchange-blackrock-citadel-sec-nyse-120-million-raise/718089/)

[21] TXSE is the most well-capitalized equities exchange to ever be approved by the SEC or file a Form 1 registration. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, https://www.txse.com/press-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange, https://www.prnewswire.com/news-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange-302571395.html, https://www.txse.com/press-releases/texas-stock-exchange-files-form-1-registration-to-operate-as-a-national-securities-exchange)

[22] BlackRock is a founding investor in TXSE. (https://www.txse.com/press-releases/texas-stock-exchange-files-form-1-registration-to-operate-as-a-national-securities-exchange, https://en.wikipedia.org/wiki/Texas_Stock_Exchange)

[23] Founding investors include market makers Citadel Securities, Jump Trading, Squarepoint, and Tower Research. (https://www.txse.com/press-releases/texas-stock-exchange-files-form-1-registration-to-operate-as-a-national-securities-exchange)

[24] Charles Schwab is a founding investor in TXSE. (https://www.txse.com/press-releases/texas-stock-exchange-files-form-1-registration-to-operate-as-a-national-securities-exchange, https://en.wikipedia.org/wiki/Texas_Stock_Exchange)

[25] Fortress Investment Group and Susquehanna Private Equity Investments are among the founding investors. (https://www.txse.com/press-releases/texas-stock-exchange-files-form-1-registration-to-operate-as-a-national-securities-exchange)

[26] Texas-based investors include Kelcy Warren, Paul Foster, and the Dell Family Office Management. (https://www.txse.com/press-releases/texas-stock-exchange-files-form-1-registration-to-operate-as-a-national-securities-exchange, https://en.wikipedia.org/wiki/Texas_Stock_Exchange)

[27] Alex Bussandri of Citadel Securities sits on the board, and Mark McCombe of BlackRock is a board observer. (https://www.txse.com/board, https://en.wikipedia.org/wiki/Texas_Stock_Exchange)

[28] The Texas gross state product is approximately $2.7 trillion. (https://en.wikipedia.org/wiki/Economy_of_Texas, https://www.txse.com/about-us)

[29] If it were a nation, the Texas economy would rank as the 8th largest in the world. (https://en.wikipedia.org/wiki/Economy_of_Texas, https://businessintexas.com/business-sectors/corporate-services/, https://gov.texas.gov/business/page/texas-economic-snapshot)

[30] Texas exports exceeded $440 billion in 2023. (https://en.wikipedia.org/wiki/Economy_of_Texas)

[31] Texas leads in job creation and has experienced rapid population growth, adding 3.5 million people from 2020 to 2023. (https://www.txse.com/, https://gov.texas.gov/business/page/texas-economic-snapshot)

[32] Texas is home to 54 Fortune 500 company headquarters, the most of any state. (https://en.wikipedia.org/wiki/Economy_of_Texas, https://businessintexas.com/business-sectors/corporate-services/)

[33] Texas has no corporate or personal income tax. (https://businessintexas.com/business-sectors/corporate-services/, https://goteamtexas.com/doing-business-here/tax-advantage, Vista Holdings)

[34] The state has one of the lowest overall tax burdens in the U.S., ranking 7th lowest nationally. (https://en.wikipedia.org/wiki/Economy_of_Texas)

[35] The Texas Enterprise Fund is a state incentive used to attract major corporate relocations. (https://gov.texas.gov/business/page/business-climate)

[36] Texas authorized specialized business courts, which began operating in 2024, to handle complex corporate litigation. (Foley & Lardner LLP)

[37] Texas Senate Bill 1057, passed in May 2025, allows companies listed on a Texas-based exchange to set higher thresholds for shareholder proposals. (https://www.billtrack50.com/billdetail/1814699, https://capitol.texas.gov/tlodocs/89R/billtext/html/SB01057F.htm, https://www.gibsondunn.com/more-significant-changes-to-the-texas-business-organizations-code-sb-1057-and-sb-2411/, https://fastdemocracy.com/bill-search/tx/89/bills/TXB00074420/)

[38] Dallas is the second-largest employer of financial services workers in the U.S., after New York City. (https://www.keranews.org/business-economy/2025-10-01/texas-stock-exchange-sec-federal-approval-dallas-economy)

[39] Major financial firms are expanding in Dallas, including Goldman Sachs’ new $500 million campus and Charles Schwab’s headquarters relocation. (Foley & Lardner LLP)

[40] The NYSE relocated an electronic exchange from Chicago to Dallas, rebranding it as “NYSE Texas”. (https://www.keranews.org/business-economy/2025-10-01/texas-stock-exchange-sec-federal-approval-dallas-economy, InnovationMap)

[41] The SEC’s approval order noted that TXSE’s proposed listing standards are “substantially similar” to the current rules for the Nasdaq Global Select Market. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, Vinson & Elkins, https://www.jdsupra.com/legalnews/sec-approves-txse-as-national-9814047/)

[42] Nasdaq’s board diversity rule requires listed companies to disclose board-level diversity statistics. (https://www.bankingdive.com/news/dallas-texas-stock-exchange-blackrock-citadel-sec-nyse-120-million-raise/718089/, Investopedia)

[43] TXSE will mandate a formal, confidential pre-application review for all listings, a process that is optional at NYSE and Nasdaq. (https://www.jdsupra.com/legalnews/sec-approves-txse-as-national-9814047/, Hunton Andrews Kurth LLP)

[44] TXSE will operate as a single-tier exchange focused on mid- and large-cap issuers. (https://www.jdsupra.com/legalnews/sec-approves-txse-as-national-9814047/)

[45] Nasdaq operates three market tiers: the Global Select Market, the Global Market, and the Capital Market. (Nasdaq)

[46] TXSE’s rules mandate a minimum bid price of $4.00 per share. (Hunton Andrews Kurth LLP)

[47] The NYSE and the Nasdaq Global Select Market both require a minimum share price of $4.00. (https://www.nyse.com/publicdocs/nyse/listing/NYSE_Initial_Listing_Standards_Summary.pdf, https://resourcehub.bakermckenzie.com/en/resources/cross-border-listings-guide/north-america/new-york-stock-exchange/topics/quick-summary)

[48] The minimum bid price for Nasdaq’s Capital Market can be as low as $2.00. (Hunton Andrews Kurth LLP)

[49] The NYSE and Nasdaq currently hold an effective duopoly over U.S. corporate stock listings. (https://www.bankingdive.com/news/dallas-texas-stock-exchange-blackrock-citadel-sec-nyse-120-million-raise/718089/)

[50] Exchanges generate significant revenue from connectivity and market data fees, which are a major cost for broker-dealers. (https://www.txse.com/solutions, https://www.bankingdive.com/news/dallas-texas-stock-exchange-blackrock-citadel-sec-nyse-120-million-raise/718089/)

[51] TXSE’s initial target market is the “southeast quadrant” of the U.S., which includes nearly 1,000 public companies and 14,000 private equity-backed firms. (https://www.txse.com/solutions, https://www.txse.com/, https://en.wikipedia.org/wiki/Texas_Stock_Exchange)

[52] The exchange’s initial focus will be on attracting dual listings from companies already public on other exchanges. (Vinson & Elkins, https://en.wikipedia.org/wiki/Texas_Stock_Exchange)

[53] Some market participants have expressed concern that a new exchange could increase market fragmentation. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, Vinson & Elkins)

[54] Many regional U.S. stock exchanges have historically been acquired by or folded into the NYSE and Nasdaq. (Investopedia)

[55] A stated mission of TXSE is to help reverse the long-term decline in the number of U.S. public companies. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, https://www.prnewswire.com/news-releases/txse-group-inc-announces-sec-approval-of-texas-stock-exchange-302571395.html, https://www.txse.com/)

[56] The existence of TXSE as a competitor is expected to increase issuers’ leverage and pressure incumbent exchanges to be more competitive on fees and services. (https://www.troutman.com/insights/texas-stock-exchange-announces-approval-by-sec/, https://www.gtlaw.com/en/insights/2025/7/the-texas-stock-exchange-a-new-era-for-public-markets-in-the-lone-star-state, https://www.bankingdive.com/news/dallas-texas-stock-exchange-blackrock-citadel-sec-nyse-120-million-raise/718089/)

[57] Both NYSE and Nasdaq have recently invested heavily and expanded their presence in Dallas. (https://www.keranews.org/business-economy/2025-10-01/texas-stock-exchange-sec-federal-approval-dallas-economy, https://www.gtlaw.com/en/insights/2025/7/the-texas-stock-exchange-a-new-era-for-public-markets-in-the-lone-star-state)