Last year, an organization announced plans to launch a Texas stock exchange, an enterprise much lauded by Gov. Greg Abbott.
Perhaps all the hullabaloo caught the attention of some folks on Wall Street because earlier this week, the New York Stock Exchange announced it was moving out of Chicago to put down some roots in Dallas, which means that Texas could soon have two stock exchanges.
Bülent Temel is a professor of economics at the University of Texas at San Antonio who joined the Texas Standard for more analysis. Listen to the interview above or read the transcript below.
This transcript has been edited lightly for clarity:
Texas Standard: We have two stock exchanges planning to open doors in Dallas. This sounds like a really big deal, indeed, for the Texas economy. Is it?
Bülent Temel: It is. Certainly, it’s a testament to the Texas economy’s overall attractiveness. It’s been a very vibrant and robust state economy in the world’s leading economy, the U.S., and that catches a lot of attention.
Now, the exchanges are in competition to open operations in the state and don’t want to lose out. The main reason for that is what we call the “first mover advantage” in our field.
When a new market is established, the first company that starts operating has certain advantages that are quite difficult to beat by followers. These advantages include brand recognition among the public, political influence, and the difficulty of switching for companies that have already established and invested in the previous exchange.
I see. Now I want to make sure I understand something. Does the Texas Stock Exchange have the first mover advantage here, or do you see the New York Stock Exchange’s Dallas office trying to get that first mover advantage by opening its doors first?
Well, the Texas Stock Exchange announced its plans last September. They were the first to announce that they would open an exchange in Dallas.
But now, the New York Stock Exchange is trying to overcome that advantage and be the first one to actually launch operations.
How does Dallas compare to other cities when it comes to financial services and the industry around it?
It’s one of the major financial hubs. It has the second-highest number of financial sector jobs after New York. It is also the financial heart of Texas, where finance is the second-biggest contributor to the state’s $2.5 trillion economy.
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That’s pretty impressive. There’s not going to be a trading floor in Dallas, right?
No, this will be a fully electronic exchange. We won’t see any market makers, position traders, scalpers, brokers, spreaders, or hedgers physically trading on the floor.
Instead, there will be about 80 to 100 traders working on computers side by side, executing trades electronically.
Why do this in Texas and not just in New York if everything is done online?
By being located in Texas, the exchange increases its attractiveness to Texas companies.
Many Texas and other Southern companies have felt alienated due to certain policies adopted by established exchanges in recent years. They’ve been turned off from trading in those venues and are now looking for a new exchange to get listed and trade their stocks.
Having a physical presence in Texas makes it more likely that these companies will choose to list there, which in turn benefits the new exchange through higher trading volume and revenue.
We’re almost out of time, but I have to ask you, there’s a saying that Wall Street loves to put a price tag on hope. Is this talk about Dallas becoming a new financial hub mostly hope and hype, or should we take it seriously?
I think it’s very real. Y’all Street is definitely challenging Wall Street.
