Wall Street’s biggest traders plan to build their own exchange

members exchange



Does the U.S. need another stock exchange?  From the point of view of trading venues, certainly not because Nasdaq, Cboe Global Markets and the division of Intercontinental Exchange Inc. NYSE has many public exchanges, and dozens of private markets are located in banks.

However, a group of Wall Street traders announced plans for a platform called Moms Exchange. Considering that the owners will be clients of the stock exchange, there is a good chance that the new platform will survive, despite overcrowding and serious competition in the industry.

Like most exchanges today, the Members Exchange will be largely invisible to everyday investors. Relatively few stocks are traded on the floor of the New York Stock Exchange. Almost all transactions are made in electronic markets located in New Jersey data centers. The rules require brokerage and trading firms to receive the best possible prices for customers, which in practice gives them little choice but to connect to all 13 exchanges and to pay all the charges they charge for market data and other services. Traders would like this to be less, and their suggestion to find a new platform seems a good solution in this battle.

The nine companies behind the Exchange are Citadel Securities and Virtu Financial Inc., which probably manage about 40% of the volume of trading on the market, often on behalf of more renowned retail brokers. Fidelity Investments, Charles Schwab, Morgan Stanley and Bank of America are among the other supporters. The new stock market has not yet been submitted for regulatory approval, so it probably will not be open until the end of this year or by 2020, but when it becomes NYSE, Nasdaq and Cboe will experience serious tensions.

Supporters at the Exchange have promised lower data rates and other fees. The threat of withdrawing a large piece of business from existing exchanges could give the founders a strong trump card in their efforts to make current trading venues reduce these costs. In this sense, Members Exchange may succeed even without opening.

Source: Bloomberg Finance L.P.

 Trader Nikolay Georgiev

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