Major Financial Partnership Announcement

• BlackRock (world's largest asset manager) and Citadel Securities (world's largest hedge fund) teamed up
• Announced creation of new Wall Street in Texas
• Timing coincides with t+1 settlement implementation incidents
• BlackRock and Citadel plus individual investors raised $120 million for exchange
• Goal: bid for new National Stock Exchange based in Dallas, Texas

Current Stock Exchange Landscape

• NYSE and NASDAQ dominate as largest exchanges in America and globally
• Both located in New York City, operate as private businesses
• Revenue model: one-time IPO fees + ongoing annual fees from listed companies
• NYSE comparison: like farmers market where businesses pay for selling space
• NASDAQ comparison: like eBay - online marketplace
• NYSE owned by Intercontinental Exchange (publicly traded)
• ~12 stock markets already operating in America, none compete with top two
• Market concentration inevitable: companies want markets with most money, investors want markets with most companies

Texas Exchange Strategic Advantages

• Texas hosts 50+ Fortune 500 companies
• Central location between East/West coasts
• More business-friendly regulatory environment
• Fewer restrictions on listed companies vs New York exchanges
• NYT coverage: companies avoid NYSE due to "regulatory overreach"
  • Board diversity requirements
  • Governance rules
• Dubbed "Texas's anti-woke exchange" by some investors

IPO Market Challenges

• New public companies experiencing longest cold streak since 1980s
• Late-stage venture capital and private equity rise
• Regulatory burdens and NYSE listing costs not worth it unless company "absolutely massive"
• Companies prefer private share sales on secondary markets or outright sales to PE firms
• Texas exchange aims to make "going public great again" with cheaper, easier process

Financial Backing and Market Making

• Most well-funded SEC registration ever at $20 million raised
• BlackRock: $9 trillion assets under management
  • Even tiny portion directed through new exchange = sufficient buying power
• Citadel Securities provides liquidity as market maker
• Both companies offer more than cash - provide market infrastructure

Citadel Securities Background

• GameStop controversy: accused of halting buying on Robinhood to protect short positions
• Court found no evidence of collusion
• Robin Hood's biggest customer through payment for order flow
• Citadel acts as counterparty to retail traders instead of going through stock exchange
• Profits from buy-sell spread on millions of daily transactions
• Market maker role: always available as buyer/seller

Competitive Impact

• Could pressure NYSE and NASDAQ to lower listing fees and service prices
• Current duopoly allows exchanges to "name their prices"
• Combined market capitalization of NYSE/NASDAQ nearly equals all other global exchanges
• Potential to attract international companies
  • 2023: roughly 1/3 of largest US IPOs were non-American companies
  • Example: ARM (British semiconductor manufacturer) - 2023's biggest IPO
• Lower regulatory pressures mean foreign companies avoid compliance with multiple rule sets

Texas Economic Impact

• Companies already relocating to Texas: Tesla, Hewlett Packard Enterprise
• Existing major corporations: American Airlines, Exxon Mobile
• Thousands of private equity-backed companies in Texas considering going public
• Potential for high-paying job influx in Dallas
• Concern: jobs may go to "fly-in finance bros from New York"
• Federal Reserve Bank of Dallas: Texas home prices among fastest growing due to coastal migration
• Risk of native Texans being priced out of housing market

Market Dynamics

• Texas exchange needs to prove viability in shrinking industry controlled by oligopoly
• Success depends on making going public cheaper and easier
• Risk of major financial institutions turning it into "their own financial playground"