In a bid to attract global companies and challenge New York-centric markets, Wall Street giants BlackRock and Citadel Securities are throwing their financial support behind the launch of the Texas Stock Exchange (TXSE). The Dallas-headquartered bourse, which has raised approximately $120 million, plans to file registration documents with the Securities and Exchange Commission later this year to operate as a national securities exchange.

TXSE aims to attract listings of exchange-traded products and take on the increasing compliance costs at New York-based indexes. It also aims to challenge newer rules, including those set by Nasdaq that require board diversity targets. The shifting economic landscape, accelerated by explosive population growth in Sun Belt states, has positioned Dallas as a dominant financial center, according to James Lee, the CEO of TXSE Group.

The Lone Star State, home to notable Fortune 500 companies such as Exxon Mobil, AT&T, Tesla, and American Airlines, has seen a wave of corporate relocations from high-tax, high-regulation states like California and New York to more business-friendly environments like Texas and Florida. Companies such as Oracle, Charles Schwab, Hewlett Packard, Caterpillar, and NRG Energy have all shifted their operations to Texas, showcasing the state's appeal for businesses.

TXSE plans to create more competition in quote activity, liquidity, and transparency, resulting in more consistent and reliable markets, said Lee. The involvement of BlackRock and Citadel Securities in backing the exchange is expected to enhance liquidity and improve market efficiency for their clients and other investors in the U.S. capital markets, according to representatives from BlackRock.

The move comes as Citadel Securities, founded and run by hedge fund billionaire Ken Griffin, shifted its headquarters from Chicago to Miami in 2022. Texas has also been at the forefront of politically "red" states that restricted their public pension funds from doing business with BlackRock and other Wall Street firms that embrace environmental, social, and governance (ESG) principles.

BlackRock, a major investor in oil companies including Exxon, has faced accusations of "boycotting" certain industries due to its call for wider emission disclosures. The company's complex relationship with Texas officials heightened when a state fund withdrew $8.5 billion from BlackRock's management, citing the company's energy policies.

In other related news, the parent companies of the New York Stock Exchange (NYSE) and Nasdaq have historically acquired smaller stock exchanges, including those in Philadelphia, Chicago, and Boston. Additionally, conservative groups have challenged Nasdaq over a rule requiring companies to disclose board diversity figures, with a federal appeals court agreeing to hear the case. The rule, approved by the SEC in August 2021, mandates companies listed on the exchange to have one diverse director or explain why they do not, with a requirement of two diverse directors by 2026.

With the joint backing of BlackRock and Citadel Securities, the Texas Stock Exchange aims to disrupt the established New York markets and capitalize on the favorable economic landscape and business-friendly environment in Texas. The launch of TXSE is expected to open up new opportunities for global companies seeking an alternative to the traditional Wall Street dominance.