Texas Border Business
The announcement of the proposed new Texas Stock Exchange (TXSE) and filing of the regulatory paperwork has made quite a splash recently. The fact that two of the heaviest hitters in the investment world, BlackRock and Citadel Securities, are behind the initiative lends instant credibility. In addition, the TXSE is a clear indication of how the financial landscape is changing.
One goal of the TXSE is to be more “CEO-friendly.” The New York Stock Exchange (NYSE) and NASDAQ have implemented cumbersome and expensive regulations which are viewed by many company executives as excessive. By providing a viable alternative, the TXSE may garner a notable share of the market. While the exchange itself will be electronic, it will have a physical presence in Dallas.
Several similar efforts have been attempted over time, most with only limited success. The movement from New York to Texas would, however, be reflective of a broader trend, both in banking and finance and the economy more generally.
There are two major industry groups comprising the activity that people generally think of as “banking.” One is banks and their branches, credit unions, and similar financial institutions. The other is securities, investment firms, and investment banks (Wall Street types). For several years, Texas has far outpaced New York in employment in the first category and is growing rapidly in the second. When added together, the differential between the two states now is extremely small.
New York has seen just 16% growth in investment banking/securities jobs over the past 20 years, while Texas has experienced 111% expansion. Behemoths such as JPMorgan Chase and Goldman Sachs already have tens of thousands of employees in Texas. New York City remains the corporate center for the industry, but Dallas is second and gaining rapidly.
In addition to solid economic performance, the Lone Star State has had far more major corporate locations and expansions than any other for 12 years in a row and is home to the most Fortune 500 company headquarters. Moreover, Texas and the Sun Belt are rife with firms backed by private equity that will be launching public offerings in the coming years.
Regional exchanges were the norm for many years, dating back to Philadelphia in 1790 (Wall Street came along two years later). Communications advances such as the telegraph and later the telephone made it efficient to consolidate much of the activity to New York. Somewhat ironically, the latest generations of technology have made such concentration unnecessary,
It remains to be seen how listings and trading volumes will fare on the TXSE. Nonetheless, the mere fact that major players are aggressively pushing forward is an unmistakable sign that Texas is already a major financial powerhouse. Stay safe!
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Dr. M. Ray Perryman is President and Chief Executive Officer of The Perryman Group (www.perrymangroup.com), which has served the needs of over 3,000 clients over the past four decades.
