Three U.S. stock exchanges opened for the first time this month, aiming to introduce competition and attract value-minded investors.
The trading floor of your preferred stock exchange may be a little less crowded this year. In September, three new stock exchanges opened in the U.S., hoping to create more competition for traders for the first time since International Exchange (IEX) opened in 2017.
Before this month, there were 13 U.S. stock exchanges: five owned by the Intercontinental Exchanges (who own the New York Stock Exchange, or NYSE), four owned by Cboe Global Markets, three owned by Nasdaq, and one by IEX.
Yet just before the start of Q4, the three newcomers are challenging the other exchanges for investors. The NYSE, Nasdaq, and Cboe currently account for about 60 percent of the U.S. equities market volume, but the recently-launched exchanges are proposing alternative platforms for investors with different goals, from investing in ESG companies to less expensive trading.
THE NEW KIDS ON THE BLOCK
These three exchanges may be debuting in the same month, but they each say they offer something unique to investors.
The Long-Term Stock Exchange
Opened: September 9
In 2018, the Long-Term Stock Exchange (LTSE) announced its intention to create a market that avoids the short-term pressures of profit reports, allowing businesses to experiment and create value in the long term. This helps companies prioritize ESG (environmental, social, and governance) values rather than immediate profitability.
In fact, the LTSE asks companies that list their shares for sale on the exchange to follow five guiding principles for corporate governance. These principles request policies that establish transparency in their long-term business plans for shareholders and other stakeholders.
The Members Exchange
Opened: September 21 (soft opening); Phase Two set for September 29
The Members Exchange (MEMX) is the only member-owned equities trading platform. With a group of owners including broker-dealers, market makers, and major financial services firms, MEMX says it will represent the interests of the founding members and their client base of retail and institutional investors.
According to MEMX, those interests include a limited number of order types, investments in technology, and lower pricing on market data and transaction fees. MEMX says the exchange aims to increase transparency in the industry with “simple and fair” pricing.
MIAX Pearl Equities Exchange
Opened: September 25
Miami International Securities Exchange (MIAX) already has three options exchanges in the U.S., opening its first exchange in 2012. Its newest venture is MIAX PEARL Equities, the first cash equities exchange from the MIAX Exchange Group.
MIAX PEARL Equities says investors participate in the exchange by prepaying certain transaction fees and achieving certain liquidity volume thresholds.
WHAT THIS MEANS FOR INVESTORS
The new exchanges are counting on investors’ dissatisfaction with the status quo. For example, not long after the NYSE complained about an investigation on transaction fees from the U.S. Securities and Exchange Commission, MEMX announced a members-focused pricing plan that excluded fees for market data or connectivity.
More competition in the marketplace could potentially lower trading costs. However, how much of an impression these exchanges will make is unclear, as well as how long that impression might take; the NYSE, Nasdaq, and Cboe have had decades to develop their market volume.
Ultimately, the best choice for investors depends on their individual goals. Those looking for the benefits of long-term value in a company may prefer the LTSE, but traders looking for short-term profits may consider other exchanges. Ideally, more choices for investors would motivate the U.S. exchanges to modernize and improve for their investors.
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