For generations, if you wanted to ring the opening bell on a stock exchange, there was really one place that mattered: New York.
But Texas has long argued that as companies, jobs and investment dollars have flowed south, the financial infrastructure should follow.
Now, one of the biggest pieces of that vision is taking shape. Last week, the Texas Stock Exchange officially opened trading, albeit in a limited rollout, with more products and eventually corporate listings expected later this year.
Is this the beginning of a genuine challenger to Wall Street, or is the hype running ahead of the reality?
Bulent Temel, an associate professor of practice in economics at the University of Texas at San Antonio, joined the Texas Standard for some analysis.
This transcript has been lightly edited for clarity.
Texas Standard: What's your sense of how the launch has gone?
Bulent Temel: Well, it was a success in terms of operational logistics because the first week was them trying to establish their systems to make sure everything operates smoothly. First four days entirely spent on that. And last Friday was the only day of actual real trading, and there were no reported problems. So as far as that, it was a success.
But in terms of long-term competitive prospects of the exchange, we'll have to see. Time will show whether or not this exchange is going to be a success.
Exchange hasn't published any data on the trading volume or dollar value traded. So we'll have to see how many companies will end up getting listed, what IPOs will be offered, and what ETFs and other products will be offered, etc. Time will show.
Well, right now the TXSE is trading a small number of existing securities. No companies are actually listed on the exchange yet, we should point out.
Walk us through what's going to be happening over the next several months and why those future corporate listings are the real milestone here.
So what they did at the opening last week is they traded five securities that are listed in other exchanges. It's called unlisted trading privileges.
And this was a very conservative approach because the last exchange that was established that was somewhat similar to the TX exchange was the one established in San Francisco back about six years ago. And so that exchange started listing or trading all of the companies that are listed in the U.S. markets.
But Texas Stock Exchange did only five. And they did that on purpose. This is a phased approach, if you will, because it just reduces operational risk for them. And it also allows them to kind of validate their systems before handling a bigger universe of the U.S. equities.
But officials tell us that by the end of this month they will be allowing trades on all other U.S. companies that are listed in other exchanges. It's just we'll have to see how many of those will end up getting dual listed in the Texas exchange or how many native ones will be listed — so brand-new companies that are only listed in TX exchange. Next year, we'll see that.
I guess if they decided to just list on the Texas Stock Exchange, that would show a high degree of confidence in what is happening here in Texas.
We should also point out, though, that the New York Stock Exchange has already launched a kind of Texas desk, I suppose you could say NYSE Texas, and NASDAQ has expanded its presence in Dallas. And now here you have the Texas Stock Exchange entering the market.
We talking about healthy competition here or are these exchanges all chasing the same relatively small pool of business? How do you see it?
They each probably will have their own niches, and that is a very beneficial thing. For instance, many people may not know this, but the biggest exchange in terms of where most trading happens in the U.S. is not New York Stock Exchange or NASDAQ; it is the Chicago Board Exchange, called Cboe. And 20% of all trades happen through them, and New York Stock Exchange is only 19%, and NASDAQ is only 15%.
And they could accomplish that because they created a different niche with an entirely different priority. They didn't try to maximize the number of listed companies or IPOs or products. Instead, they focused on the technology side of trading and also futures and derivatives trading.
So every time there's a switch from the conventional markets everybody bought from them, which boosted their volume and scale. Right now, they are the largest exchange as a result.
So all these exchanges – Texas or NASDAQ Texas and what have you, New York Stock Exchange — will be seeking some sort of niches, and they will offer what other conventional duopoly does not offer. In that sense, there may be some space for them to grow fast as a result.
Gov. Greg Abbott has declared Texas the financial capital of America, and I know that there must be some hype and hyperbole there. And certainly, Texas has some momentum in finance. We've seen corporate headquarters moving to Texas in recent years.
But how close is North Texas to becoming a true peer of a place like New York or London — or for that matter, San Francisco? I mean, what would have to happen before a comparison like that's truly justified?
Well, it depends on what metric we use to evaluate what makes a financial center. Because in finance, there's so many different industries.
There is a hedge fund side of it. There's investment banking There are commercial banking, institutional banking, insurance, just an endless number of different sectors.
And different cities have concentrations of these companies. For instance, Charlotte is a major banking sector. You know, whereas insurance is big in Dallas or, you know, stock trading in New York and what have you.
So it depends on how we evaluate it. But what we can say is that finance is a significant portion of the Texas economy today, and Dallas alone is the second city with most financial professionals employed in the United States.
So it's already a major financial hub, no doubt about it. And this Texas exchange is going to boost the credibility of the Texas economy, so benefit from the rise of the Texas economy while at the same time pushing it up even further.
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