Bank of America and Morgan Stanley plan rival stock exchange
Shares in Nasdaq and Intercontinental Exchange (ICE) have fallen as a group of nine retail broker-dealers, banks, and financial services firms plan to launch an equities exchange.
Called MEMX, or Members Exchange, it will be owned entirely by its founding members – Bank of America Merrill Lynch, Charles Schwab, Citadel Securities, E*TRADE, Fidelity Investments, Morgan Stanley, TD Ameritrade, UBS, and Virtu Financial.
The group says they “seek to deliver benefits to retail and institutional investors by introducing greater competition to the marketplace”.
Steve Quirk, executive vice-president of trading and education, TD Ameritrade, comments: “All types of investors could benefit from this simplified investing experience that will foster competition and promote practices that put the needs of investors first.”
As Reuters points out this is not the first time that industry giants have taken on the established exchanges. A decade ago, a group including Citi, Credit Suisse, Deutsche Bank, JP Morgan, Lehman Brothers, Morgan Stanley and Merrill Lynch backed a low-cost exchange called BATS.
Around the same time, other industry heavyweights launched an exchange called Direct Edge with a similar goal of slashing trading costs. The two exchanges quickly gained market share, later merged and are now owned by Cboe Global Markets.
Reuters adds that banks tried a similar move in Europe by setting up Turquoise to trade cross-border shares as a stick to persuade incumbent exchanges to cut data fees. Turquoise partly succeeded in its aim, but ended up being bought by the London Stock Exchange.
On the MEMX website, it says it will differ from other exchanges as it will offer a limited number of order types to “promote simple and transparent interactions”; and “lower pricing on market data and connectivity and transaction fees”.
It also reminds us that it is the “only member-owned equities trading platform”.
MEMX will file an application with the US Securities and Exchange Commission (SEC) in early 2019 for approval to operate as a national securities exchange.