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Texas Has An Exchange Y’All!
A few years ago, if someone had told me Texas might someday have its own major stock exchange that competes with the New York Stock Exchange, I probably would have smiled and said “Bless your heart.” But the more I read about the Texas Stock Exchange, nicknamed “Y’all Street”, the more I found myself asking, “How, if at all, is this going to affect the way investors invest and is it going to affect the U.S. economy in some way?”
As small business owners, we spend a lot of time thinking about taxes, bookkeeping, cash flow, and growing our businesses. We don't always think about where publicly traded companies list their shares. At least not until we start acting like the “Monopoly Man.” I still like that game. Yet those decisions can influence capital, innovation, and investor confidence over all.
I'm a curbside economist, so my goal here is to understand, a little bit, how this new exchange works, why it exists, and why investors and entrepreneurs should pay attention to it.
Onward and upward!
Could “Y’All Street” Be A New Beginning For U.S. Investors?
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"Someone's sitting in the shade today because someone planted a tree a long time ago."
— Warren Buffett
WHAT IS Y'ALL STREET ANYWAY?
The Texas Stock Exchange (TXSE) is a new national securities exchange developed in Texas to compete with established exchanges such as the New York Stock Exchange and the Nasdaq Exchange. Supporters of the TXSE argue that additional competition may reduce listing costs, improve service, and provide companies with another alternative for listing their company on an exchange.
WILL IT HURT WALL STREET OR NOT?
Probably not, at least not overnight. The NYSE and Nasdaq have decades of infrastructure, liquidity, institutional relationships, and global recognition. Those advantages are enormous and definitely give it an edge when it comes to competing.
However, competition often produces innovation. If TXSE successfully attracts companies, the Wall Street exchanges may respond by improving technology, lowering fees, or simplifying listing requirements. We Americans love to have choices, don’t we now.
COULD IT AFFECT INDEXES LIKE THE S&P 500, DOW JONES, OR RUSSELL 2000?
Good question, if I say so myself, and I do.
The Texas Stock Exchange, of course, doesn’t control these indexes. Index providers such as S&P 500 and the Dow Jones Industrial Average and the FTSE Russell 2000 determine which companies belong to them.
With that said, the TXSE could indirectly influence future index performance, if it encourages more companies to go public, increases competition for listings, or improves the availability of capital. Successful businesses eventually become candidates for major indexes. If those businesses grow, the indexes may benefit. Not because of the exchange itself, but because of the success of the businesses trading on the exchange.
IF THEY HAVE A HANKERIN, HOW DO INVESTORS BUY TXSE STOCKS?
If the investor is approved and operating as expected, investors would generally purchase shares of the companies on the TXSE through the same brokerage accounts they already use to buy shares of companies on the NYSE. The buying process should feel similar because brokers typically connect to multiple U.S. exchanges behind the scenes already.
HOW DO COMPANIES GET LISTED ON THE TXSE?
Like other exchanges, companies must satisfy listing standards involving governance, financial reporting, disclosure, and regulatory compliance. Choosing an exchange becomes a strategic business decision based on costs, investor visibility, liquidity, and the long-term goals of the business.
COULD OTHER STATES CREATE THEIR OWN EXCHANGES?
It definitely could happen. If Texas demonstrates that another regional exchange can successfully compete nationally, other business-friendly states could explore similar models. Whether they succeed would depend on regulation, liquidity, technology, and investor participation. I find this exciting. America is the land of opportunity, and it should be more so in the future!
WHAT THIS MEANS FOR SMALL BUSINESS OWNERS
Most small business readers probably won't be ringing the opening bell on any exchange anytime soon. But there are lessons to learn from all this.
The first one is, competition usually benefits the customers or in this case the investor. Just as businesses compete for clients, exchanges should compete for company listings and investors.
The second one is, capital usually follows opportunity. States that create opportunistic environments attract good businesses and they often attract eager good investors as well.
Here are two conversation starters for you to use at your next soiree:
• Ask, “Does more competition between exchanges ultimately help public companies raise more capital? Does it, huh?” You can leave the last part off if you want.
• Ask, “Does additional exchanges strengthen the U.S. economy by reducing the concentration of wealth in just a couple exchanges and providing more opportunities to invest? Does it?” They really have no choice but to answer after you add the last part.
FINAL THOUGHTS
Whether TXSE becomes a major force or simply another respected exchange remains to be seen. I think it represents something bigger than just another place to invest your money. I think it represents more opportunity, through more competition, which will lead to more innovation, more entrepreneurs, more successful investments, and more happiness.
I’m not trying to wrap myself in the American Flag right now, but as you know, it says in our Constitution, “life, liberty, and the pursuit of happiness." If you have life and liberty you also have the ability to seek out opportunities. Pursuing those opportunities, over the long run, usually leads to happiness.
As business owners, having multiple exchanges gives us the opportunity to find more capital to expand our business and ultimately expand our country's economy. This increases our own standard of living and the standard of living of our friends and family around us.
HEY!
If you're working to build tax-ready books, improve your accounting systems, or better understand how financial decisions affect your business, The Smith Advisory LLC would love to help. Reach out at [email protected] to start a conversation about creating cleaner financial records and better decision-making tools for your business through the use of human expertise and the utilization of AI.
DISCLAIMER
This article is provided for educational and informational purposes only and should not be considered legal, tax, accounting, or investment advice. Every financial situation is different. Consult qualified professional advisors before making investment or tax decisions.
REFERENCES
• Texas Stock Exchange – https://www.txse.com
• U.S. Securities and Exchange Commission – https://www.sec.gov
• S&P Dow Jones Indices – https://www.spglobal.com/spdji
• FTSE Russell – https://www.lseg.com/en/ftse-russell
• Reuters coverage of the Texas Stock Exchange.
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