The two established giants of Wall Street — the New York Stock Exchange (NYSE) and Nasdaq — may soon get a new rival, or at least that’s the ambition behind the recently announced Texas Stock Exchange (TXSE).

This upstart exchange, spearheaded by TXSE Group Inc., aims to carve out a niche in the U.S. equities market, challenging the dominance of the two established Wall Street giants, the Wall Street Journal reported Tuesday.

Financial services giants BlackRock and Citadel Securities are among the reported backers of the new exchange. BlackRock, the world’s largest asset manager, brings investment expertise, while Citadel Securities, a market maker, plays a crucial role in facilitating trades. Both companies have backed upstart exchanges in the past.

However, the path from vision to functional stock exchange will likely be long and filled with regulatory hurdles. Backers aim to start facilitating trades in 2025 ahead of the exchange’s first listing in 2026.

New national stock exchange in Texas: Top reasons for launching

Proponents argue that a new stock exchange could improve efficiency, and ultimately benefit both investors and companies.

James Lee, CEO of TXSE Group, told the Wall Street Journal that the exchange will “create more competition around quote activity, liquidity, and transparency,” potentially leading to a more robust market overall.

Texas’ pro-business environment is another key factor. The state boasts a lower tax burden and less stringent regulations compared to New York, where the NYSE resides. This could prove attractive to companies seeking to list their shares on a potentially more pro-business exchange.

TXSE has raised a reported $120 million from its first funding round, according to the Wall Street Journal.

Challenges with gaining approval from the SEC

Before TXSE can become a reality, it must navigate a significant hurdle — the Securities and Exchange Commission (SEC). The SEC is responsible for overseeing U.S. securities markets and ensuring they operate fairly and efficiently.

Obtaining registration from the SEC is complex, with stringent requirements surrounding exchange rules, technology infrastructure and investor protections. The Texas-based exchange plans to file registration documents with the SEC later this year, according to The Wall Street Journal.

TXSE’s success will depend on its ability to offer a compelling value proposition that sets it apart from the NYSE and Nasdaq. Otherwise, it may suffer the fate of regional stock exchanges over the last few decades, which have been absorbed into larger exchanges, shuttered or simply gone nowhere.

Securing regulatory approval, building a robust technological infrastructure and attracting market participants will likely be a long and arduous process. Whether the TXSE can become a true competitor to the established exchanges should play out over the coming years.