We've Been Trading Duopoly For Too Long: Jeb Hensarling

Bloomberg

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00:00We've had a duopoly for too long in listings. Duopolies are not good. Monopolies aren't good.

00:07So as you probably know, we used to have essentially a duopoly in trading until we had

00:12reg NMS come in, I think it was 2005. And so once we had that competition in the trading business,

00:22what we saw is that trading prices decreased anywhere from 40 to 60 percent. You had all of

00:28this innovation with alternative trading systems. You had smart order flows. You had zero commission

00:39retail trading. You just had an explosion of innovation. But reg NMS did not really impact

00:47listings. And so what we've seen in roughly the same time period is the cost of listings

00:54have increased anywhere from 50 to 200 percent. And, you know, where's the innovation?

01:00You know, direct listings, I guess you could certainly say that's an innovation. Otherwise,

01:05the list gets very, very short. And so the people involved at TEXI, we've heard from a number of

01:12different issuers, market participants, that there needs to be competition. And so when you say,

01:19why now, listen, being a fifth generation Texan, Texas is becoming kind of the economic center of

01:28gravity, I would argue, in the U.S. And we had a visionary governor. We have a visionary governor

01:34and Governor Abbott, who wanted to make Texas not only the best place to do business, start a business,

01:41incorporate a business, but to also go public and trade. And so it was really his idea to bring forth

01:50a Texas stock exchange. So I guess to some extent that answers your question now. And again, large

01:57market players saying we need some competition here. So now that you have SEC approval, when do

02:03you expect trading to actually begin?

02:04I believe trading is going to begin in Q1 of next year. I would say a lot of conversations have been

02:12taking place with a number of different issuers that we've heard from, a number of whom would say,

02:18you know, my exchange does more to me than they do for me. Or the good news is I've gone public. The bad

02:26news is I've gone public. So but the conversations have gone from theoretical to real. And already,

02:33a world class trading engine has been created. It's been beta tested. And so now those conversations

02:41go to the next level. And I believe that we will be in a position to begin trading in Q1 of next year.

02:48What kind of mix is Taxi aiming for when it comes to, say, new IPOs versus established companies

02:55switching their listings? Are you thinking it's going to be like a 50-50 split, maybe 20-80 or 80-20?

03:01Well, I would certainly say all of the above. One of the great ideas behind Taxi and one of the

03:08reasons I'm so excited to be part of it, as you well know, we have, I think, roughly half the public

03:14companies that we had in the year 2000. And this is not a good thing. This is not a good thing at all.

03:21And the companies that are going public, as you know, are going public later in their growth cycles.

03:26Yes. And a lot of people are missing out on these wonderful investment opportunities in their 401ks,

03:32in their IRAs. And companies are more restricted when they're only looking at the possibility of

03:40venture capital and private equity. So for a whole host of reasons, it's important that we give

03:48companies more opportunities to go public. And so when you say, who are we aiming for? Certainly

03:55dual listings are important. Having people switch from one of the legacy duopoly exchanges to Taxi

04:04is important. But I think what's even more important is creating these opportunities for more companies

04:10to go public. And so Taxi, we're going to have the opportunity to share economics. We've got a lower

04:17cost because being in Texas, not paying a corporate income tax, no personal income taxes, and being

04:25committed really to being an issuer oriented exchange and sharing the economics, not just of the issuing

04:34costs. But as you, again, a lot of the revenue capture comes from the capturing and curating of data.

04:42Taxi will be making that more transparent, sharing that economics with issuers. And there's just an

04:50explosion now of ETPs. That's not, that's not trying to talk a company into either co-listing or listing simply

04:58on Taxi. That's kind of a level playing field. And we're, I think that explosion is going to continue for some

05:04years to come. It will be an excellent opportunity for Taxi to thrive.

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