Some of the US’s largest retail brokers, banks and market makers have given their backing to a new stock exchange to break the dominance of the New York Stock Exchange, Nasdaq and Cboe Global Markets.
Fidelity Investments, TD Ameritrade, Morgan Stanley and Citadel Securities are among the big names which will back and control the venture, called Members Exchange, or MEMX.
MEMX’s aim is to increase competition and simplify the cost of trading for institutional and retail investors in the world’s largest equities market, where more than a dozen exchanges and 30 alternative trading venues already vie for business.
The venture will be mutually-owned, a common form of ownership for trading venues. Exchanges such as NYSE were also mutual before many went private and listed their shares.
Brokers Bank of America Merrill Lynch and UBS, retail brokers Charles Schwab and E*Trade, and electronic market maker Virtu Financial are also participating in the new MEMX venture.
MEMX said it would file an application with the Securities and Exchange Commission, the US markets regulator, early this year for approval. It normally takes around a year for a licence to be granted, although the SEC’s operations are affected by the US government shutdown.
Launched three years ago IEX, the exchange profiled in Michael Lewis’s book Flash Boys, has had limited success in taking market share. Exchanges owned by Intercontinental Exchange’s NYSE, Nasdaq and Cboe account for the majority of business conducted on exchanges.
Shares in Intercontinental Exchange, which owns the NYSE, were down 2.8 per cent in early trading on Monday. Nasdaq dropped 2.9 per cent and Cboe Global Markets was 2.1 per cent lower.
