NYSE, NASDAQ To Be Challenged By Wall Street’s New Exchange



Last Updated: January 10, 2019 at 8:41 AM EST

A host of reputable firms, the likes of Fidelity Investments, Citadel Securities LLC and Morgan Stanley, have made arrangements to unveil a new stock exchange that will be characterized by its low cost to give both Nasdaq Inc. and the New York Stock Exchange a run for its money, disclosed the companies.

Members Exchange or MEMX came into existence as a result of the unfair charges the Wall Street traders and brokers have suffered for years at the hands of the U.S. stock exchanges.

According to a report from The Wall Street Journal, all nine banks, high-frequency trading companies and brokerages funding MEMX will be in control of it.

Will MEMX Begin Operations Immediately?

According to the report, the firms invested in MEMX include Virtu Financial Inc., a high-speed trader, E*Trade Financial Corp. And Charles Schwab Corp., both retail brokers, Bank of America Merrill Lynch and UBS AG, both investment banks and TD Ameritrade Holding Corp.

MEMX has chosen Monday to be the day to make its plans public. The group’s representatives have made it known that they will be applying to the SEC for exchange status. Due to how long it takes to obtain approval from the SEC, usually 12 months or more, MEMX might be fully functional in 2020 or beyond.

The success of MEMX is not a guaranteed event, even though it has the backing of prominent firms. There is a challenge new exchanges usually face, and that is the ability to compete with established markets for trading activity. Despite this, it is expected that brokers in need of lower costs will be attracted to MEMX because of its low fees.

No Section Will Be Excluded By MEMX

Citadel Securities’ global head of business development, Jamil Nazarali, stated that the way MEMX was designed would ensure that adequate representation is given to various sections of the stock market, ranging from electronic traders to banks to retail investors.

“A lot of past exchange startups focused on one group of participants or another,” he stated. “This exchange is for everyone.”

People who are close to the situation said that the initial funding round of MEMX has raised a total of $70 million and more are expected to come as soon as more investors come on board.

The announcement falls within the period when regulators are scrutinizing the three big exchange groups. Robert J. Jackson Jr, a Democratic SEC commissioner, in a speech in September disclosed that “the SEC has stood on the sidelines while enormous market power has become concentrated in just a few players.”  In October, the SEC ruled against NASDAQ, and the NYSE in the data fees dispute that has been ongoing for quite a long time, a decision that has the potential of stopping exchanges from increasing such fees in time to come. NYSE and NASDAQ have made an appeal to the Federal court regarding the decision.

Even though MEMX is member-owned, it will still function as a for-profit company.