5 ms·

Pardon my ignorance but can anyone can help me figure out what does it mean to have a new stock exchange? Dont exchanges sell the same stocks? Is it just a way

Pardon my ignorance but can anyone can help me figure out what does it mean to have a new stock exchange? Dont exchanges sell the same stocks? Is it just a way to earn some fees by capturing some of the trades in their platform? I'll obviously google it now but I'd appreciate some insight.

kasey_junk 1y ago
Each exchange can make its own rules for what it will list and how it will trade (within the broader SEC regulations). So yes it’s just a way to capture fees from listers who like your exchange better as the primary listing exchange and from market participants that must be in every exchange (latency sensitive HFT). None of the many exchanges that have started have made a dent in the existing duopoly for real share listings that Nasdaq/nyse have. But some exchanges have made good business off of other products like etfs.
- DontchaKnowit 1y ago
  Or options products, e.g. cboe
- kkukshtel 1y ago
  This sounds like the sort of "norms" thing that a GOP-leaning state would abuse to circumvent SEC regulations by somehow declaring a state-owned exchange as some sort of SEZ to allow unregulated exchange between domestic and (primarily) foreign entities.
  - mcmcmc 1y ago
    Texas is famously fraud friendly as well
- CGMthrowaway 1y ago
  So in other words, healthy competition, and may the best man win. Contrary to many comments this is more than political reaction/posturing. The state of Texas is the world's 8th largest GDP and a diverse one, with no one sector exceeding 9%. Texas is well-positioned relative to NYC for attention around AI, as it is not geographically constrained and has an energy advantage. There is financial credibility built in as 10% of NYSE listings are already HQ'd in Texas. And Texas has a pro-business regulatory environment. This isn’t a zero-sum game where Texas grows at New York’s expense. The hope is it creates a larger, more dynamic market.
  - kasey_junk 1y ago
    NYSE Texas didn’t see a huge influx of listings when they moved there and changed their rules. I don’t think “Texas” is particularly interesting to the conversation given the dominant regulatory regime will be federal and the trading will happen in NJ but I could be wrong. There are lots of stock exchanges, which have started for lots of reasons but there isn’t really much of an industry desire to be out of nyse/nasdaq for vanilla listings. If there was it would have already happened. Seems like a publicity stunt to siphon some regnms traffic and maybe some etf listings to me, but no big drama if not.
  - tomrod 1y ago
    All true. Texas worker environment is not great though. Folks typically list income tax as an advantage but property and sales taxes more than make up the difference. Also, govt admin is fairly hostile to any infrastructure expansion, preferring to let the local car dealers buy new town charters with no infrastructure. Environmental regs are not well managed generally. Anyhow, not the worst state, not the best. Pretty balanced economy, like Ohio, Illinois, California, and Georgia.
    - ohples 1y ago
      > preferring to let the local car dealers buy new town charters with no infrastructure. I'm curious what this is referring to.
      - CGMthrowaway 1y ago
        Probably talking about Starbase (elon musk).
        ohples 1y ago
        Ahh don't know why I missed that one.
        tomrod 1y ago
        Local state legislature has several car dealership owners that also started their own chartered towns. Wasn't thinking about starbase but that qualifies.
- danielmarkbruce 1y ago
  To add on the "make it's own rules" point. This is a real thing, there are stupid rules which have been put in place at various moments and many companies are sick to death of it. https://chatgpt.com/share/68e6a1a5-e634-8002-ac97-6e2e36052e50 https://chatgpt.com/share/68e6a1a5-e634-8002-ac97-6e2e36052e...
- missingcolours 1y ago
  As a concrete example, Nasdaq had a rule requiring boards of directors to have a certain amount of "diversity".
bluGill 1y ago
> Dont exchanges sell the same stocks? No. Each company chooses what exchange their stock is sold on. Sometimes (often for large companies) you are on more then one exchange, but never all of them. Nothings stops an exchange (laws may not allow this but remember exchanges are in many countries and only subject to the laws of their country) from handling stock that the company doesn't want on them, but the value of an exchange is other people are looking there when they want to buy and sell and so it would be hard to get enough traders if the company doesn't want to list with you. Not all exchanges handle stocks. There are other things traded as well.
- dcrazy 1y ago
  > the value of an exchange is other people are looking there when they want to buy and sell and so it would be hard to get enough traders if the company doesn't want to list with you. Doesn’t regulation NMS make this significantly less relevant? A stock trading on an exchange where it isn’t listed is going to trade at the same price as everywhere else, modulo however long it takes to arbitrate the price between the exchanges. Also, I too am struggling to understand posting a trade of an unlisted stock to an exchange. This sounds pretty similar to a dark pool?
  - immibis 1y ago
    I thought stocks don't trade on exchanges where they're not listed - that's what listing means, right? And most stocks are listed on one exchange.
    - bluGill 1y ago
      Most (this is close, about half) stock trades are not on the listed exchange. If I sell stock and my broker has someone else wanting to buy that stock they are just going to internally match us up at the current price instead of going to the listed exchange. There are a lot of "dark pool" exchanges that brokers will check with first when someone wants to buy/sell stocks and so only rarely (again about half the time - not very rare) will they go all the way to an exchange. Nothing stops an exchange from accepting trades for a stock that isn't listed there. (there may be local laws that say otherwise, but there are lots of different countries). However if you are not a listing exchange brokers might not think to check your exchange when someone wants to trade and so you won't get enough volume. If you are the exchange a broker checks first though you can be the exchange.
immibis 1y ago
Surprisingly, no - moving a stock from one exchange to another is a lot harder than selling on one and buying on another (and slower, and more costly for small quantities), so stocks are surprisingly immobile. Only if you really had to, would you move them. And most stocks have one particular home exchange and there's no reason to trade them anywhere else than the one place that has the highest volume and lowest spreads for that stock.
- bigthymer 1y ago
  > there's no reason to trade them anywhere else than the one place that has the highest volume and lowest spreads for that stock. Norbert's Gambit is a good reason. It is potentially the cheapest way to effectively do a currency exchange. [1] - https://www.finiki.org/wiki/Norbert%27s_gambit https://www.finiki.org/wiki/Norbert%27s_gambit
- danielmarkbruce 1y ago
  There are reasons for the listing company to not want to be listed on an exchange though.
eflim 1y ago
Mostly yes, but a more optimistic (if naive) perspective is that the exchange wants to bring something new and valuable to the market. There are tons of little rules on exchanges about how stocks trade, and these can affect the amount of stocks and prices of stocks that different investors are able to get. These rules (often called microstructure) are partially determined by law, but there's differentiation between exchanges, and so one of the things a new exchange can do is introduce different rules that might make the market more "fair" depending how you define that.
downrightmike 1y ago
Enron 2.0 Bigger and Unregulated!
anonu 1y ago
In this case it's a marketing ploy for the state of Texas and also a way for Schwab, citadel, blackrock and fortress to press their finger on the balance of power which is far tilted towards the ICE. Also note Schwab is headquartered in Texas and they account for a significant percentage of trading in the US on a daily basis.

kasey_junk 1y ago

Each exchange can make its own rules for what it will list and how it will trade (within the broader SEC regulations). So yes it’s just a way to capture fees from listers who like your exchange better as the primary listing exchange and from market participants that must be in every exchange (latency sensitive HFT). None of the many exchanges that have started have made a dent in the existing duopoly for real share listings that Nasdaq/nyse have. But some exchanges have made good business off of other products like etfs.

DontchaKnowit 1y ago
Or options products, e.g. cboe
kkukshtel 1y ago
This sounds like the sort of "norms" thing that a GOP-leaning state would abuse to circumvent SEC regulations by somehow declaring a state-owned exchange as some sort of SEZ to allow unregulated exchange between domestic and (primarily) foreign entities.
- mcmcmc 1y ago
  Texas is famously fraud friendly as well
CGMthrowaway 1y ago
So in other words, healthy competition, and may the best man win. Contrary to many comments this is more than political reaction/posturing. The state of Texas is the world's 8th largest GDP and a diverse one, with no one sector exceeding 9%. Texas is well-positioned relative to NYC for attention around AI, as it is not geographically constrained and has an energy advantage. There is financial credibility built in as 10% of NYSE listings are already HQ'd in Texas. And Texas has a pro-business regulatory environment. This isn’t a zero-sum game where Texas grows at New York’s expense. The hope is it creates a larger, more dynamic market.
- kasey_junk 1y ago
  NYSE Texas didn’t see a huge influx of listings when they moved there and changed their rules. I don’t think “Texas” is particularly interesting to the conversation given the dominant regulatory regime will be federal and the trading will happen in NJ but I could be wrong. There are lots of stock exchanges, which have started for lots of reasons but there isn’t really much of an industry desire to be out of nyse/nasdaq for vanilla listings. If there was it would have already happened. Seems like a publicity stunt to siphon some regnms traffic and maybe some etf listings to me, but no big drama if not.
- tomrod 1y ago
  All true. Texas worker environment is not great though. Folks typically list income tax as an advantage but property and sales taxes more than make up the difference. Also, govt admin is fairly hostile to any infrastructure expansion, preferring to let the local car dealers buy new town charters with no infrastructure. Environmental regs are not well managed generally. Anyhow, not the worst state, not the best. Pretty balanced economy, like Ohio, Illinois, California, and Georgia.
  - ohples 1y ago
    > preferring to let the local car dealers buy new town charters with no infrastructure. I'm curious what this is referring to.
    - CGMthrowaway 1y ago
      Probably talking about Starbase (elon musk).
      - ohples 1y ago
        Ahh don't know why I missed that one.
      - tomrod 1y ago
        Local state legislature has several car dealership owners that also started their own chartered towns. Wasn't thinking about starbase but that qualifies.
danielmarkbruce 1y ago
To add on the "make it's own rules" point. This is a real thing, there are stupid rules which have been put in place at various moments and many companies are sick to death of it. https://chatgpt.com/share/68e6a1a5-e634-8002-ac97-6e2e36052e50 https://chatgpt.com/share/68e6a1a5-e634-8002-ac97-6e2e36052e...
missingcolours 1y ago
As a concrete example, Nasdaq had a rule requiring boards of directors to have a certain amount of "diversity".

bluGill 1y ago

> Dont exchanges sell the same stocks? No. Each company chooses what exchange their stock is sold on. Sometimes (often for large companies) you are on more then one exchange, but never all of them. Nothings stops an exchange (laws may not allow this but remember exchanges are in many countries and only subject to the laws of their country) from handling stock that the company doesn't want on them, but the value of an exchange is other people are looking there when they want to buy and sell and so it would be hard to get enough traders if the company doesn't want to list with you. Not all exchanges handle stocks. There are other things traded as well.

dcrazy 1y ago
> the value of an exchange is other people are looking there when they want to buy and sell and so it would be hard to get enough traders if the company doesn't want to list with you. Doesn’t regulation NMS make this significantly less relevant? A stock trading on an exchange where it isn’t listed is going to trade at the same price as everywhere else, modulo however long it takes to arbitrate the price between the exchanges. Also, I too am struggling to understand posting a trade of an unlisted stock to an exchange. This sounds pretty similar to a dark pool?
- immibis 1y ago
  I thought stocks don't trade on exchanges where they're not listed - that's what listing means, right? And most stocks are listed on one exchange.
  - bluGill 1y ago
    Most (this is close, about half) stock trades are not on the listed exchange. If I sell stock and my broker has someone else wanting to buy that stock they are just going to internally match us up at the current price instead of going to the listed exchange. There are a lot of "dark pool" exchanges that brokers will check with first when someone wants to buy/sell stocks and so only rarely (again about half the time - not very rare) will they go all the way to an exchange. Nothing stops an exchange from accepting trades for a stock that isn't listed there. (there may be local laws that say otherwise, but there are lots of different countries). However if you are not a listing exchange brokers might not think to check your exchange when someone wants to trade and so you won't get enough volume. If you are the exchange a broker checks first though you can be the exchange.

immibis 1y ago

Surprisingly, no - moving a stock from one exchange to another is a lot harder than selling on one and buying on another (and slower, and more costly for small quantities), so stocks are surprisingly immobile. Only if you really had to, would you move them. And most stocks have one particular home exchange and there's no reason to trade them anywhere else than the one place that has the highest volume and lowest spreads for that stock.

bigthymer 1y ago
> there's no reason to trade them anywhere else than the one place that has the highest volume and lowest spreads for that stock. Norbert's Gambit is a good reason. It is potentially the cheapest way to effectively do a currency exchange. [1] - https://www.finiki.org/wiki/Norbert%27s_gambit https://www.finiki.org/wiki/Norbert%27s_gambit
danielmarkbruce 1y ago
There are reasons for the listing company to not want to be listed on an exchange though.

eflim 1y ago

Mostly yes, but a more optimistic (if naive) perspective is that the exchange wants to bring something new and valuable to the market. There are tons of little rules on exchanges about how stocks trade, and these can affect the amount of stocks and prices of stocks that different investors are able to get. These rules (often called microstructure) are partially determined by law, but there's differentiation between exchanges, and so one of the things a new exchange can do is introduce different rules that might make the market more "fair" depending how you define that.

downrightmike 1y ago

Enron 2.0 Bigger and Unregulated!

anonu 1y ago

In this case it's a marketing ploy for the state of Texas and also a way for Schwab, citadel, blackrock and fortress to press their finger on the balance of power which is far tilted towards the ICE. Also note Schwab is headquartered in Texas and they account for a significant percentage of trading in the US on a daily basis.