Let’s NMS with Texas: The Implications of the Texas Stock Exchange for Self-Regulation

Introduction

On September 30, 2025, after years of fanfare, the Securities and Exchange Commission (“SEC” or “Commission”) approved the application of the Texas Stock Exchange LLC (“TXSE”) to register as a national securities exchange under the Securities Exchange Act of 1934.1 A new stock exchange application isn’t particularly striking: several new entrants have filed to register as a “national securities exchange” since the SEC provided a pathway for for-profit registrants in 1998.2 Nor is its provenance surprising: The Texas business community has long aimed to build and market a global financial center rivaling New York and Chicago.3 Comments on the filing, reflecting a mix of regional interests and advocates for market efficiency, mostly celebrated the venture.4

What feels different is the ambition to build from scratch a “fully integrated stock exchange” aimed at challenging the dominance of the NYSE Group and Nasdaq.5 Regional pride is a motivating force. More generally, the Texas brand evokes a pro-management, socially conservative philosophy, perhaps marked by unconcealed skepticism toward federal elites.6Some TXSE supporters entertain the hope that a Texan exchange will provide succor to entrepreneurs chafing at restrictive corporate governance standards, or to extractive industries targeted by ESG disclosure rules and other progressive-leaning initiatives.7 It will be interesting to see whether Texas’s efforts to cultivate a reputation of being less “hostile to businesses, families, and investors,” on its own, will attract a critical mass of companies to list on the TXSE.8

A more sanguine prospect is that a new primary exchange could inject a healthy dose of competition into the securities markets.9 The NYSE and Nasdaq exchange groups have long dominated primary listings of stock, and together with Cboe effectively control the national market system (NMS) mechanisms for trading and market data services. A new exchange could aim to disrupt this oligopoly, at the very least by offering competitive fees and streamlining procedures. But there is no shortage of competing trading venues offering an array of trading models, many of which do not require exchange registration at all. Moreover, competition for new product listings seems to be fairly aggressive, and empirical evidence suggests that securities markets operate pretty efficiently, at least within the current strictures of the Exchange Act regulatory framework.10

But perhaps the most enduring impact of a new primary exchange would be the vindication of industry self-regulation as an equilibrating force in securities markets. After nearly half a century of heightened collaboration and oversight, the relationship among SROs, regulators, and the industry has settled into a constitutionally awkward configuration.11 Frustration with securities markets has reached such a degree that Project 2025 devotes the better part of a chapter to the dismantling of SROs.12 A new exchange, perhaps philosophically aligned with the critics of the current SRO model, might unexpectedly restore confidence in the efficacy of industry self-regulation.

This Article—a purely speculative exercise—explores how the creation of a hypothetical new stock exchange might realize each of these potential aims. Part I provides an abbreviated history of regional exchanges. Part II examines the arguments advanced by the proponents and supporters of the TXSE filing and how they might align with the current framework for exchange regulation. Part III speculates how a new exchange might impact features of the SRO landscape, including competition in the substance, enforcement, and promulgation of SRO rules.

I.    An Abbreviated History of Regional Exchanges

For most of U.S. history (and the rest of the world), stock exchanges were closely associated with cities or geographically delimited areas and their unique business needs.13 Nineteenth-century stock exchanges physically brought together buyers and sellers of securities through their facilities. As such, they effectively operated as local trade associations or de facto monopolies providing privileged access to market-moving information, contemporaneous trading prices, and instant negotiability.14

The telegraph ultimately eroded the informational advantages that regional exchanges enjoyed. In the early twentieth century, companies capable of raising capital on a national scale in the United States might aspire to a primary listing on a national exchange (such as the New York Stock Exchange or later, the American Stock Exchange).15 The 1934 Act’s heightened regulatory obligations made it increasingly difficult for regional exchanges to attract or retain primary listings, but they successfully lobbied to retain the privilege of providing execution services with respect to dually listed securities.16

As companies scaled in size and trading technology evolved during the 1950s and 1960s, the trading resources necessary to manage public offerings and increasing trading volume led to the fragmentation of order flow across multiple trading venues.17 In this environment, some regional exchanges transformed into a “third market” supplying liquidity to (or siphoning liquidity from) the primary exchanges through intermarket linkages; others offered automated order matching technologies to investors seeking more efficient executions.18 Meanwhile, companies that opted not to list (to avoid Exchange Act oversight) sought to be admitted to trading through over-the-counter dealer networks and exchange-like trading facilities.19

The late twentieth century brought further upheaval. The paperwork crisis of the 1970s led Congress to strip exchanges of much of their authority over their members’ financial responsibility and to consolidate business conduct regulation.20 In the 1980s and 1990s, exchanges worldwide demutualized, setting off a race among exchange groups to eat or be eaten; in the process, U.S. regional exchanges were acquired and reassigned to listing and trading specific products (e.g., options, ETFs) or tiers of issuers (e.g., microcap, large cap, global cap).21 The emergence of the fully electronic Nasdaq stock market22 and the SEC’s order protection rule for automated orders diminished the exchanges’ physical, if not psychic attachment, to their trading floors.23

To accommodate this transition, the SEC stripped the definition of an exchange to its essence—a trading system that brings together buyers and sellers of securities, together with a rulebook governing trading, listing, business conduct, and financial responsibility.24 From the SEC’s perspective, the rulebook—and associated surveillance obligations and disciplinary procedures—would distinguish exchanges from other trading venues.25 And yet today, exchange-based “rules” seem increasingly anachronistic. Code and regulation have replaced floor trading rules, and compensation arrangements have emerged as the preferred incentive to promote liquidity.26 Moreover, corporate governance standards are increasingly set by federal law,27 while business conduct standards are largely set by a consolidated SRO (FINRA).28

Recent securities exchange registrants have tended to market themselves to issuers and investors based on philosophy, rather than regionalism. Some propose a superior trading experience for specific constituencies within the national market system;29 others hold themselves out as listing boards where issuers can bond themselves to corporate governance norms.30 Some promise around-the-clock trading.31 Such registrants, as a relative matter, have not captured a significant share of listings or volume.32 Perhaps as a consequence, many new trading venues don’t bother to obtain exchange registration: they happily forgo the privileges of being registered as an exchange to avoid the regulatory overhead.33

Indeed, the remaining privileges of being an exchange seem increasingly slim: these include the power to admit new issuers and products to trading through the national market system, the power to surveil markets and discipline members, the power to control the display of public pricing information, and the privilege of allocating revenues from these activities. But even these privileges may be too much for some. The Project 2025 authors recommend that, in addition to dismantling the Public Company Accounting Oversight Board34 and FINRA:

Congress should establish an independent board or commission and charge it with producing a detailed report within 18 months that examines the degree to which the regulatory functions of the various other so-called self-regulatory organizations (SROs), which are no longer self-regulatory in any meaningful sense, should be moved to the SEC.35

It is against this backdrop that the SEC must consider the registration of the TXSE and the full range of self-regulatory powers—listing, trading, discipline, surveillance, governance of national market mechanisms—it proposes to exercise under the Exchange Act.

II.   Examining the Regulatory Impact of a New Stock Exchange

The broad regional support for—and lack of any resistance to—the formation of the TXSE eliminated any reasonable doubt that the SEC would grant its application.36 TXSE’s registration comes at a time when the SEC has effectively established ground rules for how for-profit exchanges operate and has already approved a range of exchange applications under successive administrations.37 The TXSE application nevertheless generated unique attention for a variety of reasons—including both its appeals to regional and cultural affinity as well as more prosaic concerns about the efficiency of U.S. market structure. It is worth unpacking some of these arguments to assess the role of federal securities law in encouraging or constraining competition among exchanges.

A.    Appeals to Regional and Industry Affinity

A frequently cited rationale for a Texas stock exchange is to recognize the might of the Dallas financial corridor (“Y’all Street”).38 No doubt, the presence of a stock exchange is a physical manifestation of financial dominance. On a purely performative level, bell-ringing ceremonies and cocktail parties on the “trading floor” after hours are fun.39 Being part of the tight-knit club of stock exchanges also confers the cachet of owning a top-tier franchise, much like owning an NFL or MLB team.40 Building a new stock exchange in Dallas might make sense as part of a strategy for stoking regional pride, but only if it credibly meets the needs of the energy sector, recently transplanted tech companies, and other companies seeking public capital in the region.

Certainly, the State of Texas has done its part. In addition to the traditional playbook of low taxes and light regulation, Texas has taken aggressive steps to woo corporations to reincorporate in Texas. For example, the legislature has created a new commercial court system that could, over time, develop a body of precedents and burnish a reputation for independence sufficient to compete with the Delaware Court of Chancery.41 Texas has also amended its corporation law to appeal to entrepreneurs in chief alienated by the Delaware judiciary’s meticulous analysis of controller conflicts.42 Texas can also marshal investment capital and other financial tools to advance its strategic interests.43

The commitment of resources to organize a new stock exchange might seem disproportionate in relation to these goals.44 Certainly, low taxes are a draw for stock exchange operators and their issuers, members and subscribers, and personnel. For example, New York and Illinois have floated the prospect from time to time of raising revenue through stock transfer taxes, financial transaction taxes, or other direct or indirect assessments on trading firms and their associated persons.45 The emergence of a Texas stock exchange would dissuade legislatures in the home states of major national exchanges from taking their status as financial centers for granted.46

Supporters of the TXSE further envision that a Texan stock exchange might “offer critical geographic and philosophical diversification to the current securities exchange landscape.”47 In recent years, financial institutions and asset managers (many of which are headquartered in New York City) have signaled support for various progressive initiatives, such as with respect to climate change, diversity and inclusion, and firearms regulation.48 NYSE and Nasdaq had both embraced elements of the ESG movement as part of that trend. For example, Nasdaq had adopted a board-level diversity disclosure requirement for listed companies,49 while NYSE had participated in ventures to develop listing standards for “natural asset companies” that hold rights to ecosystem services.50 Both Nasdaq and NYSE had also published ESG-reporting guidelines to facilitate implementation of the SEC’s greenhouse gas disclosure requirements for public companies.51

A new stock exchange in Texas could hypothetically work in tandem with its state legislature to stand athwart such initiatives,52 particularly for regionally important industries such as energy that are often targeted by ESG activism.53 For example, Texas recently enacted a law imposing additional burdens on proxy advisors who, inter alia, provide proxy advice that takes into account factors such as ESG or sustainability goals.54 Some of these initiatives may stretch constitutional norms or the remit of SRO listing authority.55 A Texas exchange could nevertheless credibly signal a philosophical stance against imposing additional nonfinancial standards on its listed firms.

A Texas stock exchange might also be viewed as a “CEO-friendly” marketplace, aligned with the interests of entrepreneurs and venture capitalists.56 In terms of quantitative standards, an exchange might reconsider the use of alternative accounting metrics to reach emerging growth companies.57 Qualitatively, some firms might prefer governance structures that allow greater deference to the talents of a visionary or cohort of professional investors.58 Just as Elon Musk and a host of other tech illuminati have exhorted the shareholders of their companies to approve reincorporation in Texas,59 a new exchange might raise hopes for greater flexibility in structuring compensation, assessing director independence, or resisting regulatory creep.

These arguments necessarily—and perhaps somewhat unfairly—characterize NYSE and Nasdaq as the vanguard of progressive corporate governance. Exchanges’ discretion to set listing standards played a more critical role in shaping corporate governance when the SEC had relatively little authority to do so.60 Sarbanes-Oxley and Dodd-Frank have since strongarmed the exchanges to ratchet up minimum corporate governance standards.61 More broadly, efforts by exchanges to incorporate progressive-leaning norms into corporate governance listing standards generally tend to lag global and agency initiatives,62 as with previous movements to shore up corporate social responsibility.63 This may be, in part, because exchanges have an incentive to avoid responsibility for policing inherently “noisy” virtue-signaling without measurable standards.64

NYSE and Nasdaq have also faced competitive threats from exchanges catering to small and medium-sized investors for decades.65 Each group currently maintains multiple listing tiers that can entice newly public firms to lock into a pathway to accessing deeper pools of capital.66 Both are perhaps even more sensitive to relisting or dual listing of their listed issuers on rival exchanges, given the ease with which managers can take such decisions.67 For example, both exchanges recently obtained SEC approval to relax certain corporate governance requirements of particular concern to tech companies.68 With Delaware’s decision to punt determinations of director disinterestedness to listing exchanges,69 NYSE and Nasdaq will likely be under greater pressure to calibrate their enforcement of board independence.70

More broadly, the SEC itself is not only revisiting its own longstanding policies relating to corporate governance, but also pointedly encouraging states to revisit certain shareholder-friendly provisions of their domestic corporation laws as well. Chair Atkins has embraced a mandate to “Make IPOs Great Again” by reducing the cost of preparing SEC filings, curtailing precatory proposals at shareholder meetings, and abandoning its policy discouraging mandatory arbitration of securities class action litigation.71 He has further expressed a hope that “the Delaware legislature will revisit the prohibition of both mandatory arbitration and fee shifting with respect to federal securities law claims” in order to “help Delaware be a leader in the reform of securities litigation.”72 In such an environment, it is reasonable to ask whether NYSE and Nasdaq could stand in the way of the SEC’s agenda.

In short, I am not sure how successful competition on the basis of Kulturkampf will work. This is doubly true in an environment where all three branches of the federal government seem skeptical of rulemaking initiatives that expand the range of considerations “material” to the value of a security.73 Besides, there are more expressive and less expensive affinity-based approaches for issuers and marketplaces to attract capital. At the global level, an index of stocks can be molded along geographic, cultural, or social dimensions without cumbersome rulemaking.74 At the level of individual firms, motivated investors can more effectively foster social accountability through by-law proposals, investment guidelines for ESG funds, proxy advice, and other initiatives.75

B.    Bucking the Oligopoly

Beyond geographic or cultural affinity, perhaps it takes a well-financed and regionally supported exchange to credibly challenge the dominance of the nation’s leading financial markets. While commentators regularly advert to the NYSE/Nasdaq duopoly over corporate listings,76 exchanges compete inter se and with other financial service providers along multiple fronts, including trade execution, market data, indexing, investor relations, and technology services.77 Even within these service categories, exchanges must balance the competing demands of different categories of users, including issuers, liquidity providers, high-information traders, and low-information traders.78 Network effects—particularly in the “winner takes all” Internet era—might thus explain why some categories of activity tend to consolidate in a handful of venues.79

Congress and the SEC have regulated the business of operating an exchange to protect the interests of public investors in light of the conflicting incentives of such exchange constituencies.80 In particular, the Exchange Act imposes regulatory obligations on exchanges to mitigate information asymmetries, to ensure fair access to trading opportunities and real-time market data, and to uphold just and equitable principles of trade within the securities industry.81 In turn, exchanges have traditionally enjoyed concomitant regulatory privileges vis-à-vis other trading venues in order to carry out those regulatory obligations. As exchanges have transitioned to for-profit status, the justifications for balancing such burdens and privileges through regulation have begun to wear thin.82

The emergence of a new “fully integrated stock exchange” capable of attracting substantial institutional order flow out of the starting gate might affect this balancing act in many ways. For example, even if corporate listings remain sticky, a new exchange might readily capture market share in execution services (which entail low switching costs).83 Whether such competition improves or further entrenches regulation is a different question. For example, if a new exchange were to stimulate competition in listing, execution, and market data services with positive externalities for the marketplace, it may well strengthen the case for scaling back any special privileges dominant exchanges enjoy. Conversely, if a new exchange were to become overly reliant on exploiting statutory privileges to be profitable, it might well reinforce the status quo.

1.   Listing services

While IPOs are cyclical in nature,84 commentators generally acknowledge Chairman Atkins’s lament that IPO activity in the United States has declined since the early 2000s.85 Several TXSE proponents implicitly associate the decline in U.S. exchange listings with NYSE and Nasdaq’s de facto duopoly.86 While corporate listings have declined (both in the U.S. and globally),87 it may be challenging to attribute this phenomenon predominantly to oligopolistic rent-seeking. If anything, for-profit exchanges should compete aggressively for corporate listings because of the comparatively significant revenues to be generated from downstream execution and market data services.88 There is also evidence that listing standards—quantitative or qualitative—tend not to be rigorously enforced through formal delisting proceedings.89

It is true that few exchanges have successfully pursued a strategy of challenging the dominance of NYSE and Nasdaq in primary listing services.90 Some commentators point to increasing fees, tie-in arrangements involving bundled services, and cumbersome listing procedures as evidence of the exercise of oligopoly power.91 Even if NYSE and Nasdaq were to use their listing duopoly to extract rents from issuers and downstream services, the existence of duopoly power doesn’t imply that NYSE and Nasdaq do not aggressively compete for listings inter se or that firms are discouraged from going public as a result.92

Alternatively, one could argue that the standards of the primary listing exchanges are unnecessarily demanding because exchanges unduly prioritize their reputational capital.93 Exchanges have both a reputational interest and an implicit regulatory obligation with respect to ensuring the success of their listed companies.94 Low-information investors may rely on the exchanges’ vetting of issuers and infer investment worthiness based on the performance of previously listed companies. The stakes are also unquestionably higher for traditional exchanges.95 A new exchange might thus be able to relax its listing standards in its regional or specialty sectors—and pressure competing exchanges to follow—if its investor base has the knowledge and skill to value firms.96

Even putting aside the relative rigor of federal and SRO listing standards, some scholars question whether the perceived drought in exchange listings is a function of overzealous regulation at all.97 Some studies suggest that the decline in new listings is largely attributable to the increasing attractiveness of private markets, especially for smaller companies.98 These studies posit several factors, such as the deregulation of private capital raising and secondary market transactions, the increased importance of maintaining control over intangible assets, economies of scope that favor trade sales to larger firms over IPOs, and the relative efficiency of larger acquirers or private capital at bringing new products to market.99

The proliferation of exchange-traded products and other exchange-traded derivatives may further belie the claim that exchanges lack the motivation to compete for new listings.100 Exchanges have flooded the Commission with rule proposals to facilitate ETP listings for commodities, digital assets, actively managed funds, leveraged stock positions, and—cue the irony—private credit.101 The SEC’s approval of generic listing standards for commodity-based trust shares will no doubt spur further competition.102 Such products are concededly offered by repeat players who have established relationships with the dominant exchanges, authorized participants, and market makers.103 Whether TXSE will “bring new innovations and efficiencies for ETFs,” as some commentators hope, might thus hinge on its ability and willingness to disrupt such relationships for the benefit of the public.104

2.   Execution services

TXSE’s execution services, as described in its registration application, are quite conventional. It proposes “to operate a fully automated limit order book for orders to buy and sell securities with a continuous automated matching function,” rather than a physical trading floor.105 It proposes to “execute orders in price/time priority” with precedence rules comparable to those of other exchanges and trading systems, including commonly used functionality for pegging and repricing orders and reserving depth. It anticipates handling public orders from all prospective broker-dealers who become members (as required by the Exchange Act) as well as permitting members to register as market makers, subject to certain market-making requirements and obligations.106

Perhaps the application is notable for what it did not propose. TXSE has abandoned its proposal to maintain a facility to route orders to other markets.107 It doesn’t resist intermarket plans governing circuit breakers, liquidity pauses, or order audit trails—despite the opposition that some of its backers have mounted against some of these rules.108 No game-changing order type, functionality, or other innovation is proposed. Rather, TXSE appears resolved to compete based on low cost, low latency, and simplified order types, much like other new exchange registrants.109

This makes eminent sense as a strategy for a new listing exchange. Listing exchanges differ from other venues insofar as they aim to lead price discovery in their listed securities, such as by operating continuous limit-order books that aggregate and display public limit orders for execution.110 Exchanges rely on their ability to quickly and efficiently execute aggressively priced limit orders submitted by high-information traders,111 both as a strategy to concentrate liquidity and to enrich the value of their proprietary market data. To foster continuous trading and tighter spreads, exchanges may compensate market makers and liquidity providers with rebates and other incentives. The SEC protects exchange traders against competing markets by offering NMS quotations intermarket price priority.112

The share of transaction volume executed by exchanges nevertheless continues to decline.113 Institutional investors may prefer trading at prevailing prices with block positioners or through alternative trading venues to minimize market impact of large, low-information orders, while retail brokers might route customer orders to wholesale market makers in order to receive compensation for their order flow.114 Meanwhile, the SEC’s intermarket access rules incentivize some trading venues to charge high fees for accessing limit order books (and incentivize other trading venues to offer rebates to attract marketable orders), resulting in “gamesmanship by those that seek to take advantage of the Reg NMS structure.”115 It is perhaps inevitable that some exchanges have also resorted to comparable strategies to generate trading revenue.116

These dynamics pose interesting strategic challenges for a new exchange, such as TXSE, to the extent that it seeks to establish a reputation for both listing and execution services simultaneously. As a listing exchange, it cannot simply aspire to maximize execution volume or revenue; it must also vie for leadership in price discovery by designing market structures to supply liquidity for hard-to-execute trades. A further complication is that TXSE’s launch is backed by market makers, institutional investors, and retail brokers with conflicting incentives.117 TXSE will have to navigate regulatory choices with care—such as introducing new functionality, order types, or liquidity obligations—to avoid creating any impression that its rules and facilities favor the interests of certain constituencies over others.

3.   Market data services

While a “Texas tape” is not immediately in the cards,118 the entry of a new listing and trading exchange will force renegotiation of NMS plans and might help to disrupt the economics of public and private market data services over time. Various intermarket plans mandate consolidation of public quotation and trade information from exchanges and other trading venues.119 Those plans also allocate revenues from the dissemination of that information to individual exchanges or FINRA based on formulas reflecting the value-added to price discovery.120 Meanwhile, exchanges remain free to sell other categories of proprietary data outside of those feeds.121

Market data fees have been a particularly sore point for the securities industry.122 While exchanges and SROs are required to publish their best priced orders and last sale data through consolidated data feeds, they have an interest in maintaining the value of their proprietary data feeds relative to publicly disseminated data.123 As multi-sided platforms, exchanges allocate their costs across multiple services: it is arguable that higher market data fees justifiably subsidize the listing and trading services that render the exchanges’ proprietary data so valuable.124 Indeed, both Congress and the courts have thwarted attempts by the securities industry to press for caps on market data fees.125

More generally, the SEC has occasionally pushed back against the dominance of NYSE, Nasdaq, and Cboe over NMS plans. Not only does each registered exchange exercise veto power over plan amendments, but the NYSE, Nasdaq and Cboe exchange groups comprise several exchange registrants, which inflate each group’s share of votes.126 Unable to persuade SROs to amend NMS plans on their own accord, the SEC has tweaked the operation of these plans by rules that increase the breadth and depth of consolidated information and that permit multiple consolidators to compete on the basis of information services.127 A new exchange—working in tandem with a philosophically aligned Commission—might in theory be positioned to demand bolder amendments to NMS plans.

A new exchange may nevertheless face a long, uphill battle in competing with the exchanges on these terms. But it could work. Were a new exchange to attract a considerable number of primary listings, it might seek greater control over the plans governing its own listed issuers. Similarly, if a new exchange were successfully to attract trading activity away from other exchanges or dealer systems, it might have a strong claim to seek recalibration of how trading activity is measured, reported, and compensated. Finally, if a new exchange were to attract enough informed order flow from institutional investors and private funds, its proprietary data feeds would become a valuable information product.

III. Vindicating Industry Self-Regulation

Perhaps the most curious aspect of the Texas Stock Exchange filing is that it is taking place in a political and judicial environment uniquely hostile to industry self-regulation. The self-regulatory model has faced longstanding criticism because of its inherent conflicts of interest.128 The demutualization of stock exchanges in the 1990s and the growing divergence of interests among exchange shareholders, member firms and the public exacerbated these concerns.129 The policy solution was to consolidate most disciplinary authority in a single SRO not affiliated with any exchange (FINRA). Scholars of the administrative state now question FINRA’s lack of political accountability and the constitutionality of its rulemaking and disciplinary activities.130

Some of the unease with the self-regulatory model practiced today may be explained by the ambiguity in the relationship between the SEC and the SROs and the SROs inter se. Structurally, the SEC has the authority not only to approve or disapprove of SRO rules, but also to add, amend, or rescind SRO rules and to sanction exchanges that fail to enforce their rules (or federal securities law).131 This can create the impression that SROs act as surrogates for the SEC, rather than as industry bodies whose disciplinary authority is constrained by the SEC.132 The fact that membership in a consolidated financial industry regulator is de facto mandatory for public broker-dealers reinforces this belief.133

Could a new “fully integrated stock exchange” present an opportunity to address some of the legal and operational criticisms inveighed against self-regulation? In this part, I explore various ways that a new exchange might breathe new life into the self-regulatory model. First, there may be an opportunity to revive modest differentiation in SRO rulebooks and thereby allay concerns about lack of accountability to the industry. Second, there is an opportunity to create alternative enforcement venues to address concerns about transparency and fairness. Finally, the SEC could use the occasion of a major new stock exchange registration as a way to explore the effectiveness of its SRO rule approval processes generally.

A.    Rule Experimentation

It is a core premise of the Exchange Act that each stock exchange or other SRO maintains its own rulebook.134 The Act contemplates that exchanges can distinguish themselves to a degree based on their listing, trading, and business conduct rules as well as their facilities and other services. There are few, if any, successful challenges to the constitutionality of exchange trading rules or listing standards,135 insofar as listing and trading rules simply are not a “traditional, exclusive public function” of the state.136 But critics have challenged the constitutionality of the more recent statutory requirement that all public broker-dealers be members of a national securities association to participate in the brokerage industry—at least if there is only one such association (FINRA).137

The courts may soon reconsider whether mandating membership in a private SRO constitutes a delegation of executive authority that “subverts the constitutional design.”138 Even if an SRO-membership requirement is upheld, courts may continue to probe the extent to which the SEC’s ex post review of FINRA disciplinary actions is sufficient to uphold FINRA’s outsized power to write, adjudicate and enforce rules for the entire securities industry.139 Moreover, if the courts were to foreclose ex ante delegation of authority to a single private SRO,140 Congress and the SEC would have to sort through messy questions regarding which rules should be uniformly enforced by the SEC and which rules could be left to SROs or trade associations.141

Competition among rule-writers has operated in practice. For decades, NYSE and NASD maintained competing rulebooks, and made efforts to coordinate exams, rules, and other aspects of SRO oversight,142 despite industry frustration with inconsistent or unequal rules and duplication of examinations.143 The Project 2025 architects similarly envision competing rule-writers in other contexts (such as accreditation of academic institutions),144 emphasizing the perceived dangers of allowing private actors to leverage federal authority.

If competition among SROs is what this constitutional moment requires, unscrambling FINRA is probably not the answer.145 Some credible philosophical competition among rule-writers would likely be necessary to satisfy relevant policymakers that there is meaningful choice. For example, a sympathetic SEC might be inclined to allow SRO rule-writers to experiment more aggressively with different regulatory models, such as bright-line rules for smaller firms and more flexible, resource-intensive standards for larger firms. The task would likely fall to one or more current exchanges to emerge as the loyal opposition.

As an example, let us consider best execution of orders in national market system securities. There are two core compliance obligations entailed in ensuring best execution of customer orders. First, under FINRA Rule 5310, member firms must exercise diligence to find the best price under the circumstances (a process standard).146 Second, under Regulation NMS, trading markets have an obligation to display their best quotations and orders, to make them accessible for execution to the public, and to avoid executing trades at prices inferior to a public order displayed by another exchange (an order handling rule).147 

Calibrating these obligations through uniform rulemaking is challenging. The SEC under former Chair Gensler proposed to codify best execution standards into federal regulation and to impose more stringent order handling rules on broker-dealers under Regulation NMS.148 The SEC under current Chair Atkins abandoned those proposals and seems poised to relax Regulation NMS because of the complexities of administering intermarket activity by rule.149 Some commentators have meanwhile advocated that the SEC adopt clearer benchmarks to reduce the compliance burden (or opportunism) associated with a diligence process.150

Rather than politicize order execution rules, might the SEC instead encourage SROs to split the difference by balancing these principles in different ways?151 Institutional brokers might prefer a public commitment to a process-oriented diligence standard that requires the exercise of discretion in handling orders, especially to the extent that their clients have the independent means to verify execution quality. Retail firms might prefer a rule or formula (like a trade-through or trade-at rule) that legitimates internalization of orders for highly liquid securities at a benchmark price, while freeing them to compete on more easily quantifiable metrics such as price improvement or commissions.

There are probably better strategies for making progress toward an efficient market structure than letting competing SROs write divergent business conduct rules.152 But letting a new SRO with a reputation for regulatory contrarianism experiment with its rulebook might be a palatable compromise for those who oppose a unitary SRO or federalization of trading rules. Such rule-writing experiments might reveal efficiencies and inform cost-benefit analysis without implicating due process concerns.153 Now that historical rulebooks have been consolidated, moreover, competing SROs can differentiate rules with precision and intentionality. And if all else fails, the SEC can exercise its authority to adopt a common rule.154

B.    Rule Enforcement

A new primary exchange might also change the way SROs approach the enforcement of their rules, including both disciplinary proceedings and customer arbitration. Exchanges enforce their listing and trading rules through the threat of suspension or delisting/expulsion.155 By contrast, securities exchanges generally delegate enforcement of business conduct rules for their member broker-dealers to FINRA, which may lay a better claim to impartiality when imposing remedial fines and suspensions on its members.156 Customers may also bring (or be required to bring) claims against broker-dealers for violations of federal and state law in SRO-operated arbitration fora.157

Enforcement of SRO rules faces both legal and economic constraints. The discretion of an SRO to enforce business conduct rules is circumscribed by federal law and subject to de novo SEC and judicial review.158 For example, FINRA may not sue to collect fines or penalties under state contract law, so its ability to assess fees is backed solely by the threat of suspension or expulsion from membership (which in turn may be stayed upon SEC review).159 Mandatory customer arbitration has also been the focus of significant criticism: It is challenging to provide a cost-efficient yet fair and transparent forum for adjudication of claims involving securities disputes.160

Congress and the SEC likely have limited ability to alter the underlying economics of disciplining business conduct.161 While FINRA polices violations of federal securities laws by its members, much of its enforcement activity entails promoting compliance with standards of trade.162 Requiring the SEC to take over enforcement of such business conduct rules may be unnecessarily costly, particularly if the federal courts read the Constitution to prohibit in-house adjudication. Proposals to increase the transparency and rigor of arbitration awards could similarly raise the cost of what is meant to be informal arbitration.163 Perhaps the most troubling aspect of SRO disciplinary authority, moreover, is that securities professionals can leave FINRA if compliance becomes too costly and yet continue to offer financial advice and recommend financial products.164

It is possible that a new entrant could work with sympathetic state courts and legislatures to explore other options. For example, some commentators have suggested that brokerage customers be able to sue broker-dealers in specialized courts.165 A new exchange might arrange for customers of the exchange’s broker-dealer members the option to do so, and the SEC might be able to use its authority over SRO arbitration proceedings to bless such arrangements.166 A state such as Texas might even offer to create a subsidized arbitration and mediation program for securities disputes.167 As an added benefit, state tribunals might also be empowered to exercise jurisdiction over investment advisory, insurance, and other non-securities financial services to harmonize enforcement.

C.    The SRO Rulemaking Process

Finally, a new stock exchange presents a fresh opportunity to consider how to regulate the promulgation of SRO rules. Over the past few decades, the federal courts have ramped up scrutiny of agency rulemaking, including heightened cost-benefit analysis requirements, reduced judicial deference to agency interpretation, and failure to justify “arbitrary or capricious” actions in the absence of an adequate record. By contrast, the “mini-APA” process in Section 19 of the Exchange Act has avoided many of those judicial mandates.168 Project 2025 recommends that SROs be required to increase the transparency of their rule writing process and incorporate cost-benefit analysis in SRO rulemaking.169

Part of the difficulty in reforming SRO rulemaking policy is that SRO “rule changes” as a statutory matter encompass everything from setting rates and modifying trading algorithms, to designing new products, refining members’ obligations to their customers, and policing the integrity of financial markets. In areas where SROs compete with one another, there is a danger that SROs' rule-making power preserves positional advantages or enriches SRO shareholders at the expense of members and competitors. When an SRO faces no competition, there is a risk that it may shirk its responsibility to devise rules that balance costs with corresponding benefits.

In both cases, rule review is essential to protecting the public against overreach. And yet, Congress has not factored this distinction into its oversight of securities markets. With respect to not-for-profit SROs like FINRA or the MSRB, the SRO’s governing body ought to engage in cost/benefit analysis because its rules set a uniform standard.170 And yet, paradoxically, Congress has frustrated the SEC’s ability to ensure the robustness of the mini-APA process by imposing time limits on the SEC’s ability to approve or disapprove business conduct rules of significant import.171 Rather than mandating duplicative cost/benefit analyses, Congress could simply allow the SEC the time it needs to properly vet SRO rules.

By contrast, with respect to for-profit exchanges, there may be good reasons to expedite review of certain listing standards, trading rules or fee schedules.172 If non-exchange competitors can change their trading fees and rules on a dime, exchanges should have comparable flexibility.173 In theory, robust competition among exchanges and other market centers discourages exchanges from adopting unnecessarily costly rules where the playing field is level. It thus makes sense for the SEC to focus its resources on reviewing proposed rule changes that leverage statutory prerogatives exclusive to exchanges.174 And yet, it is challenging to draw a clear line between the two. For example, in expediting approval of market data fees, it is arguable that Congress has blocked the SEC from exercising ex ante oversight of potentially anticompetitive SRO behavior.175

The prospect of more evenly matched exchanges competing to provide listing and market data services might well relieve some of the pressure on Congress and the SEC to referee SRO rulemaking.176 Exchanges have important public-facing obligations, but competition—combined with an opportunity for meaningful SEC review and the occasional antitrust investigation to identify and curb negative externalities—may be a better tool for fulfilling them. These quasi-public obligations, moreover, may well diminish over time as exchanges slough off their remaining privileges. A robust new primary exchange might nudge us toward that goal.

IV. Conclusion

TXSE is arguably the most intriguing new exchange registrant in recent years, insofar as it is backed not only by financial heavyweights and regional interests, but also an aggressive marketing campaign attuned to the sensibilities of the entrepreneurial class. It has raised expectations not only among issuers and investors looking for a marketplace aligned with their needs, but also among scholars of finance and securities law who view more competition as a solution to structural problems in stock trading. Now that its application has been approved, the Exchange’s challenge is to manage those expectations within the strictures of the Exchange Act. And yet, in the longer term, with the prospect of an ideologically aligned Commission, its ultimate success might lie in finding ways to relax those strictures—and in the process, vindicate self-regulation.

Table 1: NMS Instruments by Primary Exchange

Table 2: Five-Day Average Notional Volume of Trading on Exchange and OTC Markets as of August 5, 2025179

Tables 3a and b: Allocation of Market Data Revenues Among SROs

1. CTA Plan—Tape A (2024)184

b. Nasdaq-UTP Plan—Tape C (2024)185

• See In the Matter of the Application of Texas Stock Exchange LLC for Registration as a National Securities Exchange; Findings, Opinion, and Order of the Commission, 90 Fed. Reg. 47880, 47893 (Oct. 2, 2025) (hereinafter TXSE Approval Order); see alsoTexas Stock Exchange LLC; Notice of Filing of Application, as Amended, for Registration as a National Securities Exchange Under Section 6 of the Securities Exchange Act of 1934, Exchange Act Release No. 102773, 90 Fed. Reg. 15375 (Apr. 10, 2025); In re Texas Stock Exchange LLC, 90 Fed. Reg. 31360 (July 14, 2025) (order instituting proceedings to determine whether to grant or deny application). For a copy of the Texas Stock Exchange’s application and exhibits, see TXSE – Form 1 Applications and Exhibits, U.S. SEC (Apr. 4, 2025), https://perma.cc/8WAZ-VLB4.
• Regulation of Exchanges and Alternative Trading Systems, 63 Fed. Reg. 70844, 70880 (Dec. 22, 1998) (adopting interpretation of the definition of an “exchange”); see also Fair Administration and Governance of Self-Regulatory Organizations, 69 Fed. Reg. 71126, 71227–28 (Dec. 8, 2004) (hereinafter “SRO Governance Release”); Concept Release Concerning Self-Regulation, 69 Fed. Reg. 71256, 71280 (Dec. 8, 2004) (hereinafter “SRO Concept Release”).
• See, e.g., Leigh Clemons, Branding Texas: Performing Culture in the Lone Star State 104 (2008) (describing the success of Texas business leaders in “carefully crafting a message of economic prosperity and political acumen to rival that of the Midwest and East”).
• See TXSE Approval Order, supra note 1, at 47880–81 (summarizing comments). For comments received on the proposed application, see Texas Stock Exchange LLC; Notice of Filing of Application, as Amended, for Registration as a National Securities Exchange under Section 6 of the Securities Exchange Act of 1934, Submitted Comments, U.S. SEC, available at https://perma.cc/YW6R-82PC (archived on Oct. 28, 2025).
• Press Release, TXSE Group, TXSE Group Inc Announces SEC approval of Texas Stock Exchange (Sept. 30, 2025), https://perma.cc/6RUU-NR7J.
• See, e.g., Jamie Selway, Director, Division of Trading and Markets, SEC, “Remarks at the Roundtable on Rule 611 of Regulation NMS,” Austin, Texas, Dec. 16, 2025 (“The free air of Texas inspires and invigorates—and reminds us that markets work.”), https://www.sec.gov/newsroom/speeches-statements/selway-121625-remarks-roundtable-rule-611-regulation-nms; Clemons, supra note 3, at 2; Christine Hurt, Texas, Delaware, and the New Controller Primacy, 67 Ariz. L. Rev. 693, 700–01 (2025).
• See, e.g., Corrie Driebusch, New Texas Stock Exchange Takes Aim at New York’s Dominance, Wall St. J. (June 4, 2024), https://perma.cc/59G8-9MHP; infra Part II.A.
• Comments of Senator Ted Cruz, supra note 4 (May 23, 2025) (describing New York—where NYSE and Nasdaq are headquartered—as “a state that remains hostile to businesses, families, and investors”).
• See Comments of John L. Thornton, Chair, et al., Committee on Capital Markets Regulation, supra note 4, at 2 (Aug. 4, 2025) (suggesting that “competition introduced by TXSE could lower costs for U.S. public companies, including listing fees and ongoing compliance costs, that could help encourage private companies to go public and foreign companies to list in the United States”); infra Part II.B.
• James J. Angel, et al., Equity Trading in the 21st Century: An Update, 5 Q.J. Fin. 1550002 at 35 (2015) (concluding that “empirical results show that the markets are functioning reasonably well despite the many calls for change,” while suggesting that “market structures could be enhanced to better serve investors”).
• See infra Part III.
• Seeinfra note 35.
• See James A. Meeker, The Work of the Stock Exchange 367-68 (1917) (describing the array of leading and regional securities and commodities exchanges in the early twentieth century). For example, the Philadelphia Board of Brokers, officially licensed in 1790, specialized in sovereign obligations of the United States of America and other semi-governmental entities. See Philadelphia Stock Exchange Papers (processed by Meghan Vacca, June 2006), at 1 (on file with Historical Society of Pennsylvania, Collection 3070, Phila., Pa.), https://perma.cc/2L6A-AUM4. The Boston Stock Exchange, founded in 1834, initially traded the stocks of local banks and insurance companies. See Boston Stock Exchange Is Established, When & Where in Boston, https://perma.cc/6AGJ-CV8N (last visited Oct. 25, 2025). The San Francisco Stock and Bond Exchange was founded as a market for securities of companies during the California Gold Rush. See Charles A. Fracchia, The Founding of the San Francisco Mining Exchange, 48 Cal. Hist. Soc’y Q. 3 (1969); Lindsay Arthur, San Francisco’s Big Board Grew Out of a Basement Meeting, Museum City of S.F. (Oct. 10, 1955), https://perma.cc/72TU-UBU4.
• See, e.g., Ranald Michie, Exchanges in Historical and Global Context, in Regulated Exchanges: Dynamic Agents of Economic Growth 15-17 (ed. Larry Harris 2010) (describing the development of exchanges prior to 1914); Meeker, supra note 13, at 369–93 (touting the attributes of early twentieth century “organized markets”). At the enactment of the Securities Exchange Act of 1934, there were about 43 exchanges. Exchange Act Release No. 27611, 55 Fed. Reg. 1890 (Jan. 19, 1990).
• Special Study of the Securities Markets Part 2, H.R. Doc. No. 88–95, at 811 (1963).
• See SEC Historical Society, Transformation & Regulation: Equities Market Structure 1934 to 2018, https://perma.cc/EK9H-P5VA (discussing SEC order to NYSE to rescind prohibition against multiple trading).
• See Walter Werner, The SEC as a Market Regulator, 70 Va. L. Rev. 755, 760–64 (1984).
• See Therese H. Maynard, What is an “Exchange?”: Proprietary Electronic Securities Trading Systems and the Statutory Definition of an Exchange, 49 Wash. & Lee L. Rev. 833, 859–60 (1992); Norman S. Poser, Restructuring the Stock Markets: A Critical Look at the SEC’s National Market System, 56 N.Y.U. L. Rev. 883, 893 (1981).
• See Michael J. Simon & Robert L.D. Colby, The National Market System for Over-the-Counter Stocks, 55 Geo. Wash. L. Rev. 17 (1986). Exchange Act periodic reporting requirements were eventually extended to over-the-counter companies that met the criteria of Section 12(g). Id.
• Adoption of Uniform Net Capital Rule and an Alternative Net Capital Requirement for Certain Brokers and Dealers, Exchange Act Release No. 11497, 40 Fed. Reg. 29795 (July 16, 1975) (adding uniform federal net capital rule and eliminating exemption for members of an exchange).
• See Roberta S. Karmel, Turning Seats into Shares: Causes and Implications of Demutualization of Stock and Futures Exchanges, 53 Hastings L.J. 367, 372–73 (2002).
• In re Application of the Nasdaq Stock Market LLC for Registration as a National Securities Exchange, 71 Fed. Reg. 3550, 3566 (Jan. 23, 2006) (granting the application of the Nasdaq Stock Market LLC for registration as a national securities exchange).
• See Regulation NMS, 70 Fed. Reg. 37496 (June 29, 2005) (adopting intermarket order protection rule protecting immediately and automatically accessible orders).
• See 17 C.F.R. § 240.3b-16 (2025) (providing interpretation of the definition of an “exchange” under the Exchange Act); see also 17 C.F.R. § 240.3a1-1 (exempting trading systems from regulation as exchange).
• 17 C.F.R. § 240.3a1-1 (2025) (exempting “alternative trading systems” in compliance with Regulation ATS from registration as an exchange); § 242.300(a)(2) (defining alternative trading system to exclude systems that set and enforce rules governing the conduct of subscribers).
• See, e.g., Stanislav Dolgopolov, Providing Liquidity in a High Frequency World: Trading Obligations and Privileges of Market Makers and a Private Right of Action, 7 Brook. J. Corp. Fin. & Com. L. 346–67 (2013).
• Seeinfra Part II.A.
• Seeinfra Part III.
• The Investors Exchange aims to protect orders from latency arbitrage. SeeCitadel Sec. LLC v. SEC, 45 F.4th 27, 31 (D.C. Cir. 2022) (summarizing IEX’s operation). Other exchanges tout low-cost, low-latency, and transparent services. See Members Exchange, About, https://perma.cc/HLM5-GZSN; MIAX, Our Company, https://perma.cc/3DWJ-DQHV.
• The Long-Term Stock Exchange and Green Impact Exchange offer listing standards that promote sustainability. See, e.g., Long-Term Stock Exchange, Frequently Asked Questions, https://perma.cc/VXX5-W6JD; Green Impact Exchange, About, https://perma.cc/VXX5-W6JD.
• See24 Exchange Announces Launch Date for First Stage of 24X National Exchange, the First SEC-Approved 23/5 Stock Exchange, 24X Bermuda (June 10, 2025), https://perma.cc/2M6N-Q8TE.
• For a snapshot of the five-day average notional volume of trading in the national market system as of Aug. 5, 2025, see infra Table 2.
• As of September 30, 2025, there are 78 alternative trading systems with a Form ATS on file with the SEC. SeeAlternative Trading System (ATS) List, U.S. SEC, https://perma.cc/X4W2-QTUL (archived Oct. 30, 2025).
• To date, the PCAOB has survived attempts to dismantle it.
• David R. Burton, Financial Regulatory Agencies—Securities and Exchange Commission and Related Agencies, in Mandate for Leadership: The Conservative Promise 830 (Project 2025 Presidential Transition Project) (Paul Dans & Steven Groves eds., 2023).
• One commenter opposed the registration of an additional exchange in “an already saturated U.S. equity exchange landscape,” while another commenter observed that fragmentation resulting from exchange competition needs to be addressed “regardless of whether we have three exchanges or three hundred.” TXSE Approval Order, supra note 1, at 47881 (citing two commenters).
• Of the issues discussed in TXSE Approval Order, the ownership and governance of the TXSE appear to have received the most attention. See id. at 47881–88. This reflects that the SEC has never formally adopted a rule or policy guidance for the governance of for-profit exchanges, even though all existing exchanges have converted to a for-profit model. See SRO Governance Release, supra note 2, at 71132.
• See, e.g., Elizabeth Findell, Welcome to Y’all Street, Texas’ Burgeoning Financial Hub, Wall St. J., Aug. 10, 2024, https://perma.cc/8TQ6-UDYG (noting that a new exchange “could add heft to financial interest in the area,” even if there is disagreement “whether the effort has a chance of success or is primarily a political statement”).
• As discussed at note 105 below, the Texas Stock Exchange does not plan to operate a physical trading floor.
• Much like regional sports franchises, national securities exchanges enjoy limited exemptions from antitrust law and control the allocation of pooled revenues from collective activities. See generally Nathaniel Grow, Regulating Professional Sports Leagues, 72 Wash. & Lee L. Rev. 573, 576 (2015).
• See, e.g., Zohar Goshen & Tomer Stein, Leaving Delaware? The Essential Role of Specialized Corporate Courts, 125 Colum. L. Rev. 2077, 2136–44 (2025) (explaining that “[n]ot only could the Texas Business Court develop the specialization necessary to adjudicate corporate disputes, but it may also reflect the directors’ and shareholders’ judgment [of firms like Tesla] that incorporating in Texas is better for firm value”).
• See, e.g., Hurt, supra note 6, at 744–47. For example, as Hurt discusses, Texas Senate Bill 29 enacted numerous amendments to the Texas Business Organizations Code in 2025 that “generally make it more difficult for shareholders to enforce their rights” against corporations whose shares are listed on a national securities exchange. Id. These amendments include raising a claimant’s pleading burden to overcome the presumption of the business judgment rule, Tex. Bus. Org. Code § 21.419(d)(2)(B); limiting shareholder inspection rights in connection with derivative suits, id. § 21.218(b-2); and allowing firms to establish an “ownership threshold” for shareholders to have standing to bring a derivative proceeding, id. § 21.552(a)(3).
• Texas has already flexed the muscle of its municipal securities program and public pension plans on several occasions. See, e.g., Tex. Gov’t Code Ann. §§ 809.001(1), 809.053 (West 2022) (requiring divestment by state governmental entities of the publicly traded securities of financial companies that “boycott energy companies”); Letter from Leslie Brock, Assistant Attorney General to All Bond Counsel (Jan. 18, 2023) (rejecting Citigroup’s standing letter because it “has a policy that discriminates against a firearm entity or firearm trade association”).
• See Dolgopolov, supra note 26.
• See, e.g., S.B. 2351 (Ill. 2023–2024) (proposing to impose financial transaction tax on four Chicago exchanges); Assemb. B. A.7791 (N.Y. 2019-2020); S.B. S6203 (N.Y. 2019–2020) (proposing to repeal rebate of stock transfer tax); see also Comments of James J. Angel (May 27, 2025), supra note 4.
• Notably, both NYSE and Nasdaq have established exchanges in Dallas since the TXSE initiative. See Sean Saldana, Dallas may soon have three stock exchanges. What does that mean for the Texas economy?, Texas Standard, Apr. 11, 2025.
• See, e.g., Comments of Lee Bratcher, Texas Blockchain Council, supra note 4. (May 23, 2025).
• See, e.g., Amanda Shanor & Sarah E. Light, Anti-Woke Capitalism, the First Amendment, and the Decline of Libertarianism, 118 Nw. U. L. Rev. 347, 366–70 (2023) (describing engagement by banks and investment firms in ESG initiatives).
• See Order Approving Proposed Rule Changes To Adopt Listing Rules Related to Board Diversity, 86 Fed. Reg. 44424 (Aug. 12, 2021) (approving Former Nasdaq Rules 5605(f) and 5606). The Fifth Circuit sitting en banc vacated the SEC’s order approving these rules as exceeding the SEC’s authority under the Securities Exchange Act of 1934. All. for Fair Bd. Recruitment v. Sec. & Exch. Comm’n, 125 F.4th 159, 185 (5th Cir. 2024) (en banc). Nasdaq subsequently repealed these rules. Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Repeal Nasdaq’s Board Diversity Listing Requirement, 90 Fed. Reg. 8554 (Jan. 30, 2025); see also Sehrish Siddiqui, Fifth Circuit Vacates Nasdaq Board Diversity Rules, Securities Law Exchange (Dec. 13, 2024), https://perma.cc/2EYR-V87D. For a discussion of the merits of Nasdaq’s board diversity proposal from an efficiency perspective, see Michal Barzuza & Gideon Parchomovsky, Economic Analysis of Board Diversity, 49 J. Corp. L. 1043 (2024); Gregory H. Shill & Matthew L. Strand, Diversity, ESG, and Latent Board Power, 46 Del. J. Corp. L. 255, 316–22 (2022).
• See, e.g., Mary Grace Thurmon, Making Money Green: A Proposal for A Sustainable Stock Exchange, 48 Wm. & Mary Envtl. L. & Pol’y Rev. 265, 299 (2024).
• See, e.g., Nasdaq ESG Reporting Guide 2.0 (May 2019); NYSE, ESG Disclosure Guidance, https://perma.cc/WRF7-3Y8X (archived Oct. 30, 2025). This guidance was developed in collaboration with global exchanges. See World Federation of Exchanges, WFE ESG Guidance and Metrics (rev. June 2018).
• See William F. Buckley, Jr., Our Mission Statement, National Review (Nov. 19, 1955), https://perma.cc/3PV2-QLSX.
• See, e.g., Anne M. Choike, Local Firm Governance, 15 Harv. Bus. L. Rev. 41, 83–86 (2025) (discussing city and local government efforts to shape corporate purpose, including through “anti-ESG policies restricting the investments of their city employees’ retirement funds or excluding stakeholder-governed entities from eligibility for business licenses”).
• Tex. Bus. Orgs. Code, tit. 1, § 6A.101(a)(1)–(4) (2024), as amended by S.B. 2337, 89th Leg. (Tex. 2025–2026). The bill would also impose additional burdens on advice that is inconsistent with management’s recommendation on a shareholder-sponsored proposal, including by requiring a “written economic analysis of the financial impact on shareholders of the proposal.” Id. at § 6A.101(a)(2)(B), (b) –(c).
• See, e.g., Institutional Shareholder Services Inc. v. Paxton, No. 1:25-cv-01160 (W.D. Tex. Aug. 29, 2025) (text order enjoining Texas Attorney General from taking any action to enforce S.B. 2337 against plaintiff). In its motion for a preliminary injunction, Institutional Shareholder Services (hereinafter ISS), a proxy advisory firm, argued that S.B. 2337 violated its First Amendment rights because it is “impermissible content and viewpoint discrimination” and “compels ISS’s speech.” Id. Pl’s Mot. Prelim. Inj. (July 24, 2025). ISS also argued that S.B. 2337 violated its Due Process rights under the Fourteenth Amendment because it “leaves ISS guessing at how to comply,” “all but guarantees arbitrary enforcement,” and “chills protected speech.” Id.
• Driebusch, supra note 7.
• See notes 95–96 infra. For now, “TXSE’s proposed corporate governance and shareholder approval rules appear to be based, virtually verbatim in certain instances, on Nasdaq’s rules” and “TXSE’s proposed initial and continued listing requirements for domestic (non-SPAC) corporate issuers are more stringent than those of the Nasdaq’s lowest tier.” David S. Wolpa et al., New Texas Stock Exchange Aims at Nasdaq and NYSE, Troutman Pepper Locke LLP (Apr. 8, 2025) https://perma.cc/Y3KD-WXHZ.
• In addition to the legislation discussed above, supra note 43, the Texas House recently passed a bill aiming to raise eligibility requirements for nonbinding shareholder proposals submitted to a corporation listed on a Texas stock exchange. H.B. 4115, 89th Leg. (Tex. 2025–2026) (hereinafter HS4115). HS4115 clarified that it would apply “only to a nationally listed corporation that makes an affirmative election to be governed by this section under an amendment to the corporation’s governing documents.”
• See, e.g., Paul Grewal, Why Coinbase Is Leaving Delaware for Texas, Wall St. J., Nov. 12, 2025 (praising Texas’s “efficiency and predictability, in part thanks to recent corporate-law reforms that enhance governance flexibility and legal predictability”); Jai Ramaswamy et. al., We’re Leaving Delaware, and We Think You Should Consider Leaving Too, Andreessen Horowitz, (July 9, 2025), https://perma.cc/M28L-MKAD (accusing the Delaware courts, inter alia, of appearing “biased against technology startup founders and their boards”).
• See, e.g., John C. Coffee, Jr., Racing Towards the Top?: The Impact of Cross-Listings and Stock Market Competition on International Corporate Governance, 102 Colum. L. Rev. 1757, 1782 (2002) (suggesting that foreign issuers listed on U.S. exchanges in the 1990s largely submitted to SEC disclosure requirements and U.S. GAAP reconciliation, rather than exchange listing standards).
• See Onnig H. Dombalagian, Principles for Publicness, 67 Fla. L. Rev. 649, 687 (2015). The SEC retains the authority to modify its rules implementing such mandates or to exempt listed companies from these mandates, though presumably it would grant such exemptions to all listing exchanges equally. See 15 U.S.C. § 78mm (2010) (granting the SEC general exemptive authority under the Exchange Act).
• See, e.g., Virginia Harper Ho, “Comply or Explain” and the Future of Nonfinancial Reporting, 21 Lewis & Clark L. Rev. 317, 318 (2017) (discussing the development of non-U.S. stock exchange listing standards); Chris Brummer & Leo E. Strine, Jr., Duty and Diversity, 75 Vand. L. Rev. 1, 48–64 (2022) (discussing developments preceding the Nasdaq rule).
• For example, scholars critical of the proliferation of corporate governance mandates—particularly as they relate to progressive-leaning efforts such as corporate social responsibility, ESG, or sustainability—tend to focus on Congressional and agency action, rather than stock exchange initiatives. See, e.g., Jerry W. Markham, U.S. Securities and Exchange Commission and the “Deep Administrative State”: A Case Study of its ESG Rules, 14 Am. U. Bus. L. Rev. 151 (2025).
• See Miriam A. Cherry, The Law and Economics of Corporate Social Responsibility and Greenwashing, 14 U.C. Davis Bus. L.J. 281, 301 (2014). Indeed, exchange efforts to lead progressive reform, even if sincere, could inadvertently incentivize “greenwashing” or “wokewashing” by listed firms seeking to avail themselves of relaxed standards. Thurman, supra note 50, at 312.
• See, e.g., Jose Miguel Mendoza, Securities Regulation in Low-Tier Listing Venues: The Rise of the Alternative Investment Market, 13 Fordham J. Corp. & Fin. L. 257, 283 (2008) (discussing the competitive threats posed by the UK AIM market and other new European markets); SEC Small Business Advisory Committee, Recommendation Regarding Separate U.S. Equity Market for Securities of Small and Emerging Companies (Feb. 1, 2013) (on file with the U.S. SEC).
• NYSE Group maintains the NYSE and NYSE American listing tiers for corporate issuers and the NYSE Arca tier for ETPs; Nasdaq maintains the Global Select Market, Global Market, and Capital Market. Notably, TXSE is not currently tiering listing standards. According to the Troutman analysis discussed above, the TXSE’s listing criteria appear to be “more stringent than those of the . . . Nasdaq Capital Market” and its initial listing criteria appear “to line up most closely with the NYSE’s standards.” See supra note 57.
• A board of directors generally does not need to obtain shareholder approval to delist from a stock exchange, relist on another exchange, or maintain listings on multiple exchanges. See 17 C.F.R. § 240.12d2-2(c) (2025); NYSE Listed Company Manual, Section 806.02 (providing for removal from list by resolution of the board of directors and compliance with Exchange Act Rule 12d-2(c)), https://perma.cc/4T54-E4Z5; Nasdaq Rule 5840(j), https://perma.cc/X8D4-A7TX (same). Exchange listing rules to that effect have long been rescinded. See Order Approving Proposed Rule Change and Amendment Nos. 1 and 2 Relating to Voluntary Delistings by Listed Companies, 64 Fed. Reg. 40633, 40634 (July 27, 1999) (eliminating the requirement of supermajority shareholder approval before a listed company can delist its securities from the New York Stock Exchange). With the emergence of Nasdaq and competing exchanges, the SEC regarded such rules “as a deterrent to intermarket competition rather than a necessary investor protection provision.” Id. at 40633.
• See, e.g., Order Granting Approval of a Proposed Rule Change To Amend Phase-In Schedules, 89 Fed. Reg. 70674 (Aug. 30, 2024) (approving amendments to phase-in schedules for director and committee independence requirements); Order Granting Accelerated Approval of Proposed Rule Change re Shareholder Approval of a Sale of Securities to a Substantial Security Holder, 89 Fed. Reg. 113 (Jan. 2, 2024).
• Del. Code tit. 8, § 144(d)(2) (2025) (as amended by S.B. 21, 153rd Gen. Assemb. (Del. 2025)) (presumption of disinterestedness for director of corporation listed on stock exchange if “the board of directors shall have determined that such director satisfies the applicable [exchange listing] criteria for determining director independence”).
• See Geeyoung Min & Kwon-Yong Jin, Relational Enforcement of Stock Exchange Rules, 47 B.Y.U. L. Rev. 149, 191 (2021) (discussing relative incentives for enforcing director independence under state law and exchange listing standards).
• See, e.g., Acceleration of Effectiveness of Registration Statements of Issuers With Certain Mandatory Arbitration Provisions, 90 Fed. Reg. 45125, 45130 (Sept. 19, 2025) (providing notice of the Commission’s determination that henceforth “the presence of an issuer-investor mandatory arbitration provision will not impact decisions regarding whether to accelerate the effectiveness of a registration statement”); Division of Corporation Finance, SEC, Statement Regarding the Division of Corporation Finance’s Role in the Exchange Act Rule 14a-8 Process for the Current Proxy Season, Nov. 17, 2025, https://perma.cc/5GPC-K9QU (determining “to not respond to no-action requests for, and express no views on, companies’ intended reliance on any basis for exclusion of shareholder proposals under Rule 14a-8”); seealso Paul S. Atkins, Chairman, SEC, “Keynote Address at the John L. Weinberg Center for Corporate Governance’s 25th Anniversary Gala,” Newark, Delaware, Oct. 9, 2025, https://perma.cc/3TPF-WRZL.
• Id.
• See, e.g., All. for Fair Board Recruitment v. SEC, 125 F.4th 159, 182 (5th Cir. 2024) (questioning the SEC’s approval of Nasdaq’s board diversity rule as outside the remit of the Exchange Act); Press Release, SEC, SEC Votes to End Defense of Climate Disclosure Rules, Washington D.C. (Mar. 27, 2025) (on file with the SEC) (withdrawing defense before Eighth Circuit); In re Enhancement and Standardization of Climate-Related Disclosures for Investors, Securities Act Release No. 11280 (Apr. 4, 2024) (order issuing stay of enforcement).
• See, e.g., David Blackmon, New BlackRock ETF Signals a Strong Focus on the Texas Economy, Forbes (June 25, 2025), https://perma.cc/Y34B-CXTZ; Tony Dong, There’s an ETF For That? Investing in Texas, ETF Central (July 15, 2025), https://perma.cc/EL7M-Q4Y3.
• See, e.g., Brummer & Strine, supra note 62, 81–91 (discussing approaches to tailoring social accountability standards).
• See, e.g., Daniel M. Gray, The Essential Role of Regulation in Promoting Equity Market Competition, 1 Brook. J. Corp. Fin. & Com. L. 395, 398 (2007) (discussing regulatory and industry efforts to check a “potential NYSE/Nasdaq duopoly”).
• Larry Harris, Trading & Exchanges 526–42 (2003).
• Steven McNamara, The Stock Exchange as Multi-Sided Platform and the Future of the National Market System, 2018 B.Y.U. L. Rev. 969, 996 (2018).
• Id.; see also Harris, supra note 79, at 524–42 (discussing the “economic forces that cause markets to consolidate and to fragment”); Michael Morelli, Courts, Competence, and Competition: Brewing Tensions Between Administrative, Antitrust, and Securities Law, 64 B.C. L. Rev. 1615, 1667 (2023) (noting that “these interrelationships may induce price and fee competition under certain conditions,” but create “potential anticompetitive externalities related to trading venue concentration and collusion”).
• 15 U.S.C. § 78b (2010) (discussing the necessity for exchange regulation).
• 15 U.S.C. §§ 78f(b), 78k-1 (2010).
• Cf. Angel et al., supra note 10, at 29 (noting the inherent problem that “no regulatory mechanism can ensure that the value of the liquidity provided [by a market maker] is equal to the value of the special privileges exercised”).
• For example, in the early 2000s, alternative trading systems (ATSs) were able to siphon a significant share of trading volume in index ETFs away from exchanges by focusing on high-speed trade execution. See Terrence Hendershott & Charles M. Jones, Island Goes Dark: Transparency, Fragmentation, and Regulation, 18 Rev. Fin. Stud. 743, 756 tbl. 1 (2005); see Thierry Foucault & Albert J. Menkveld, Competition for Order Flow and Smart Order Routing Systems, 63 J. Fin. 119, 152 (2008) (discussing findings relating to the impact of smart-routing technologies on intermarket competition). Algorithmic trading and smart-routing services have proliferated since these studies. See text accompanying notes 110–112.infra.
• See, e.g., Division of Economic and Risk Analysis, SEC, Access to Capital and Market Liquidity 5 (Aug. 2017) (observing that “[c]apital raised through initial public offerings (IPOs) ebbs and flows over time, reaching highs in 1999, 2007 and 2014, and lows in 2003, 2008, and 2016”).
• See, e.g., Xiaohui Gao et al., Where Have All the IPOs Gone?, 48 J. Fin. & Quant. Analysis 1663, 1668 tbl.1 (2013) (observing average number of IPOs declined from an average of 310 per year between 1980–2000 to an average of 99 per year between 2001–2012). Jay R. Ritter, Initial Public Offerings: Updated Statistics tbl. 1 (2025), https://perma.cc/EAB5-JM2C (showing how the same dataset suggests that IPO activity rebounded to an average of 130 IPOs per year between 2013–2019, with a significant spike in 2020 and 2021 (165 and 311 IPOs, respectively) and dampened activity thereafter (an average of 55 IPOs per year in 2022–2024)). See also Atkins, supra note 71 (expressing concern that there are only “approximately 4,700 exchange-listed companies today, compared to a high point of approximately 7,800 in 1997”).
• See, e.g., Comments of John L. Thornton, Co-Chair, et al., Committee on Capital Markets Regulation, supra note 9 (suggesting “approval would enhance competition among listing venues of U.S. public companies that could encourage additional public listings”); Comments of Christopher A. Iacovella, President & CEO, American Securities Association, Comment Letter on Texas Stock Exchange LLC; Notice of Filing of Application, as Amended, for Registration as a National Securities Exchange under Section 6 of the Securities Exchange Act of 1934 (July 9, 2025), https://perma.cc/P4ET-MB5X (noting “two troubling developments” in equity markets: “an increase in concentration and monopolistic practices amongst U.S. national securities exchanges, and a sharp decline in the number of public companies listed in the United States”).
• See Nandini Sukumar et al., An Open Letter from the World Federation of Exchanges: Revitalising Public Markets: A Global Imperative for Growth, World Federation of Exchanges (July 17, 2025), https://perma.cc/R8LE-MBVN.
• See infra Table 3. For a discussion of the incentive of duopolists to compete for exchange listings, see Andreas M. Fleckner, Stock Exchanges at the Crossroads, 74 Fordham L. Rev. 2541, 2572 (2006); Jonathan R. Macey, The Stock Exchange as a Firm: The Emergence of Close Substitutes for the New York and Tokyo Stock Exchanges, 75 Cornell L. Rev. 1007 (1990).
• Min & Jin, supra note 70, at 166–69 (noting that exchanges have three options, “forbearance, public reprimand, or suspension/delisting”). It is quite natural that exchanges would be reluctant to delist firms based solely on technical failure to adhere to quantitative or qualitative standards, in no small part because of the significant consequences to public investors of a delisting determination. See Jonathan Macey et al., Down and Out in the Stock Market: The Law and Economics of the Delisting Process, 51 J.L. & Econ. 683 (2008).
• Comments of John L. Thornton, Co-Chair, et al., Committee on Capital Markets Regulation, supra note 9 (noting the efforts of the IEX and Long-Term Stock Exchange to attract primary listings).
• Because exchanges generally enjoy implied immunity from antitrust laws, part of the function of SEC review of rule proposals is to screen out rules that impede competition and capital formation. See, e.g., Order Granting Approval of Proposed Rule Change to Describe Complimentary Services, Exchange Act Release No. 65963, 76 Fed. Reg. 79262, 79265–67 (Dec. 21, 2011) (discussing competitive impact of bundling investor relations services with Nasdaq listing).
• McNamara, supra note 78, at 1002 (discussing why “there is intense competition among the exchanges,” even as “it appears difficult for new entrants to break into the industry”). For example, Walmart recently moved its listing from NYSE to Nasdaq, thereby “align[ing] with the people-led, tech-powered approach to our long-term strategy.” Colin Kellaher, Walmart Is Moving Its Listing to Nasdaq From NYSE, Wall St. J., Nov. 20, 2025 (quoting Walmart), https://perma.cc/BS5V-ZGAV.
• But see Cromwell Coulson, President & ECO, OTC Markets Group Inc., Comment Letter on Texas Stock Exchange LLC; Notice of Filing of Application, as Amended, for Registration as a National Securities Exchange under Section 6 of the Securities Exchange Act of 1934 (July 29, 2025), https://www.sec.gov/comments/10-249/10249-633927-1877714.pdf (praising “TXSE’s plan to implement more rigorous initial listing standards than those currently in place at other national securities exchanges”).
• See Order Granting Approval of a Proposed Rule Change to Adopt Additional Initial Listing Criteria for Companies Primarily Operating in Certain Jurisdictions, 86 Fed. Reg. 56338, 56342 (Oct. 8, 2021).
• See Thomas J. Chemmanur & Paolo Fulghieri, Competition and Cooperation Among Exchanges: A Theory of Cross-Listing and Endogenous Listing Standards, 82 J. Fin. Econ. 455, 481 (2006) (predicting that “the greater the reputation of an exchange, the higher the listing standard set by that exchange”).
• Id. at 463 (presuming that the investor base for each exchange may exhibit different competencies in evaluating listed firms, such as based on geography or industry).
• See Angel et al., supra note 10, at 20 (noting that “[m]any potential factors may explain this decline” and some are “benign”); Gao et al., supra note 85, at 1675–79, 1688–90 (questioning the “regulatory overreach” hypothesis).
• Michael Ewens & Joan Farre-Mensa, The Deregulation of the Private Equity Markets and the Decline in IPOs, 33 Rev. Fin. Stud. 5463, 5505–06 (2020).
• See, e.g., id. at 5505–06; Craig Doidge et al., The U.S. listing gap, 123 J. Fin. Econ. 464 (2017); Gao et al., supra note 85, at 1664, 1690–91 (2013) (positing “that there is an ongoing change in the economy that has reduced the profitability of small companies, whether public or private”); Sreedhar T. Bharath & Amy K. Dittmar, Why Do Firms Use Private Equity to Opt Out of Public Markets?, 23 Rev. Fin. Stud. 1771, 1810–11 (2010) (suggesting that “factors inherent and observable about the firm” determine whether it will go private—or even whether it will seek an IPO).
• See, e.g., Jason Zweig, What’s Left to Be ETF’d?, Wall St. J. (Sept. 13, 2024), https://perma.cc/FX67-8YFU (describing supply-side interest in launching new ETFs); infra Table 1 (showing the number of exchange-traded funds and exchange-traded products listed on stock exchanges rivals that of corporate issuers).
• See, e.g., Benjamin Schiffrin, The Rise of the Private Markets Poses Risks for Retail Investors and Capital Formation 6–9 (Better Markets Nov. 18, 2024), https://perma.cc/SCN5-B5YJ (discussing the risks to retail investors of private credit ETFs). The SEC occasionally approves rules for new product classes in batches to prevent any single exchange from exploiting a first-mover advantage. See, e.g., Order Granting Accelerated Approval of Proposed Rule Changes to List and Trade Shares of Ether-Based Exchange Traded Products, 89 Fed. Reg. 46937 (May 30, 2024) (approving amendments to SRO rules to permit simultaneous listing and trading of shares of eight ether-based ETPs); Order Granting Accelerated Approval of Proposed Rule Changes To List and Trade Bitcoin-Based Commodity-Based Trust Shares and Trust Units, 89 Fed. Reg. 3008 (Jan. 17, 2024) (11 bitcoin-based spot ETPs).
• See Order Granting Accelerated Approval of Proposed Rule Changes To Adopt Generic Listing Standards for Commodity-Based Trust Shares, 90 Fed. Reg. 45414, 45414–15 (Sept. 22, 2025) (permitting securities exchanges to list and trade “commodity-based trust shares,” including trust shares based on digital assets, that meet specified eligibility criteria without first submitting a proposed rule change with the Commission).
• See, e.g., Rohan Arora et al., Concentration in the Market of Authorized Participants of US Fixed-Income Exchange-Traded Funds, Bank of Canada (Nov. 2020), https://perma.cc/2FEG-68KM (noting that three “authorized participants” performed 82% of gross creations and redemptions of fixed-income ETF shares in 2019, and eight APs accounted for 80% of gross creations and redemptions of equity ETF shares).
• See Comments of Michael Nicholas, CEO, Bond Dealers of America, Comment Letter on Texas Stock Exchange LLC; Notice of Filing of Application, as Amended, for Registration as a National Securities Exchange under Section 6 of the Securities Exchange Act of 1934 (May 22, 2025), https://www.sec.gov/comments/10-249/10249-605207-1765274.pdf. BlackRock and Citadel—two of TXSE’s most prominent backers—are among those repeat players.
• In re Texas Stock Exchange; Notice of Filing of Amendment No. 2, Exchange Act Release No. 103604, 2025 WL 2171950 (July 31, 2025).
• See TXSE Exhibits, supra note 1, at B-1, Proposed Rule 11.18 (requiring continuous two-sided quotations within an absolute or relative range of the NBBO or last sale price).
• See TXSE Approval Order, supra note 1, at 47889 (noting that TXSE will not offer any outbound routing functionality “[i]nitially”). Such order routing services raise conflicts of interest between the exchange and exchange members who provide comparable services.
• See, e.g., American Sec. Ass’n, Citadel Sec. LLC v. SEC, No. 23-13396, 2025 WL 2092054, at *5 (11th Cir. July 25, 2025).
• Seesupra note 29 and accompanying text (discussing the business models of the IEX, MIAX, and the Members Exchange).
• Angel et al., supra note 10, at 14–15.
• Order anticipation is a significant concern of high-information investors, to the extent that they wish to avoid being “front-run” by other traders. Id. at 24–25.
• See 17 C.F.R. § 242.611 (2024) (prohibiting market makers or alternative trading systems from executing orders (as principal or agent respectively) unless they offer their customers a better price than the best protected price published by any exchange). For example, to comply with the order protection rule, market makers must offer their customers a slightly better price than the best publicly displayed price in the marketplace, while ATSs might offer functionality to execute customer orders at a price pegged within the national best bid and offer. See Regulation NMS, 70 Fed. Reg. 37496 (June 29, 2005). The rule nevertheless contemplates that published quotations are exclusive of trading fees or rebates. See 17 C.F.R. § 242.610(c) (2024) (capping fees for access to quotations).
• See Angel et al., supra note 10, at 14–16 (finding that NYSE’s share of NYSE-listed volume and Nasdaq’s share of Nasdaq-listed volume have declined from 2004 to 2013); infra Table 2 (finding Angel et al.’s estimate that off-exchange trading accounted for about 40% of market share in 2012 remains true today).
• Angel et al., supra note 10, at 14–19, figs.19 & 20 (attributing off-exchange order flow to institutional dark-pool trading, block order execution, and internationalization of customer order flow).
• Press Release, SEC, SEC Announces Roundtable on Trade-Through Prohibitions (July 21, 2025) (on file with the SEC) (quoting SEC Chairman Paul Atkins); see also Michael Morelli, Courts, Competence, and Competition: Brewing Tensions Between Administrative, Antitrust, and Securities Law, 64 B.C. L. Rev. 1615, 1666 (2023) (discussing externalities of exchange competition); Angel et al., supra note 10, at 21–23, 30–33 (discussing “maker/taker pricing,” “taker/maker pricing,” and the added complexities of imposing a “trade-at” rule).
• For example, in addition to the Nasdaq Stock Market, Nasdaq operates two additional exchanges for execution services: Nasdaq BX “incentivizes the execution of trades by providing rebates to liquidity removers,” while Nasdaq PSX “reward[s] market makers who actively quote at the National Best Bid or Offer (NBBO).” SeeNasdaq, Global Trading and Market Services—Equities, https://perma.cc/EWJ9-SGRG (last visited Nov. 11, 2025).
• See Driebusch, supra note 7 (highlighting the support of Citadel Securities and BlackRock, who “have a history of backing upstart exchanges”). As with other for-profit exchanges, TXSE’s Stockholder Agreement caps beneficial ownership and voting power of its stock to limit undue influence of exchange members as a class as well as individual owners or group of owners. See TXSE Approval Order, supra note 1, at 47883–84 (capping ownership by any person or related persons at 40% and voting power at 20%).
• There are currently three consolidated tapes, each of which consolidates last sale information for equity securities based on the issuer’s listing market: Tape A (NYSE), Tape B (NYSE American, NYSE Arca, and other regional exchanges), and Tape C (Nasdaq and certain UTP-eligible trading venues). TXSE plans to join the existing plans. See TXSE Approval Order, supra note 1, at 47891–92.
• FINRA, National Market System Plans, https://perma.cc/V7BM-ZFJC (last visited Nov. 11, 2025).
• For a summary of the market data revenue allocation formula currently used by the CTA Plan, see Consolidated Tape Association, https://perma.cc/3U4Y-9RNR. See alsoinfra Table 3 (providing a snapshot of the allocation of market data revenues among SROs for Tapes A and C); Order Approving, as Modified, a National Market System Plan Regarding Consolidated Equity Market Data, Exchange Act Release No. 101672, November 20, 2024, A-57 to A-59 (setting proposed formula for cost allocation and revenue sharing under the “Consolidated Tape Plan,” which is expected to succeed the CTA Plan/CQ Plan and the UTP/Plan in 2027).
• See Jerry W. Markham, Regulating the Sale of Stock Exchange Market Data to High-Frequency Traders, 71 Fla. L. Rev. 1209, 1230 (2019) (distinguishing “core data” which is collected from NMS market participants and sold to the public in a consolidated feed, on the one hand, and “non-core data,” which exchanges sell separately to other market participants, on the other hand).
• See, e.g., Roger D. Blanc, Intermarket Competition and Monopoly Power in the U.S. Stock Markets, 1 Brook. J. Corp. Fin. & Com. L. 273 (2007) (contending that “large investors are charged market data fees beyond the means of smaller investors and then given faster access to that data, thus granting them substantial trading advantages”).
• Markham, supra note 121, at 1229–33 (underscoring that exchanges may supply their proprietary non-core data to high-frequency traders and other market participants in advance of the core data supplied by consolidated feeds and that the “time and information differences may offer valuable trading opportunities”). Id.
• Cornerstone Research, Platform Competition and the Regulation of Stock Exchange Fees, National Law Review (Dec. 15. 2021); McNamara, supra note 78, at 1019.
• See, e.g., NetCoalition v. SEC, 715 F.3d 342 (D.C. Cir. 2013) (holding that the court had no jurisdiction to review SEC’s refusal to take action to suspend exchange fees after Congress amended the Exchange Act to allow such fees to “take effect upon filing”); see also 15 U.S.C. § 78s(b)(3) (allowing fee filings and other rule filings to “take effect upon filing”).
• See Exchange Act Release No. 87906, 85 Fed. Reg. 2164, 2168–71 (Jan. 14, 2020); see also Nasdaq Stock Mkt. LLC v. SEC, 38 F.4th 1126, 1139 (D.C. Cir. 2022) (finding SEC proposal to group SROs by affiliation for voting purposes not contrary to the Exchange Act but finding decision to include representatives of non-SROs on an NMS plan operating committee invalid).
• See 17 C.F.R. § 242.600(a)(31) (defining “depth of book data”); § 17 C.F.R. 242.614 (registration of competing consolidators); Market Data Infrastructure, Exchange Act Rel. No. 88216, 85 Fed. Reg. 16726, 16868–71 (March 24, 2020) (adopting release).
• See, e.g., Roberta S. Karmel, Should Securities Industry Self-Regulatory Organizations Be Considered Government Agencies?, 14 Stan. J.L. Bus. and Fin. 151, 169 (2008); Marianne K. Smythe, Government Supervised Self-Regulation in the Securities Industry and the Antitrust Laws: Suggestions for an Accommodation, 62 N.C.L. Rev. 475 (1984).
• See, e.g., Karmel, supra note 21, at 420–27.
• See, e.g., Emily Hammond, Double Deference in Administrative Law, 116 Colum. L. Rev. 1705, 1709, 1721–34 (2016) (discussing the limitations of the state action doctrine and the private non-delegation doctrine in constraining SRO behavior); William A. Birdthistle & M. Todd Henderson, Becoming a Fifth Branch, 99 Cornell L. Rev. 1, 24–41 (2013) (describing the evolution of SROs such as FINRA into “quasi-governmental organizations”).
• 15 U.S.C. § 78s(b)-(c). The obligation of SROs to enforce compliance with federal securities law, as required by 15 U.S.C. § 78s(g)(1), raises particular concerns.
• Benjamin P. Edwards, Supreme Risk, 74 Fla. L. Rev. 543, 548–49 (2022) (highlighting the difficulty of distinguishing government-controlled industry SROs such as stock exchanges from government-created agencies).
• See, e.g., David Burton, Reforming FINRA, Heritage Foundation, Feb. 1, 2017.
• See, e.g., 15 U.S.C. §§ 78f(b) (requirements for “rules of the exchange” seeking registration), 78o-3(b) (requirements for “rules of the national securities association” seeking registration), 78s(b) (proposed rule changes of SROs).
• The Fifth Circuit has suggested that the “intimate involvement of [a registered securities exchange] with the Securities and Exchange Commission brings it within the purview of the Fifth Amendment controls over governmental due process.” Intercontinental Indus., Inc. v. Am. Stock Exch., 452 F.2d 935, 941 (5th Cir. 1971). Congress subsequently codified SRO notice-and-comment standards for rulemaking and procedural standards for SRO disciplinary proceedings. 15 U.S.C. § 78s(b) & (d).
• Alliance for Fair Board Recruitment v. SEC, 85 F.4th 226, 239–45 (5th Cir. 2023) (collecting cases and quoting Halleck, 139 S. Ct. at 1928), reh’g en banc granted, opinion vacated, No. 21-60626, 2024 WL 670403 (5th Cir. Feb. 19, 2024), and on reh’g en banc, 125 F.4th 159 (5th Cir. 2024); seesupra note 49 (discussing the history of the case).
• 15 U.S.C. § 78o(b)(8) (added by Pub. L. No. 98-38, 97 Stat. 206 (1983)). The SEC has generally exempted exchange members who trade solely on the exchange and do not carry customer accounts from this requirement. See 17 C.F.R. § 240.15b9-1.
• Alpine Sec. Corp. v. FINRA, 121 F.4th 1314, 1343 (D.C. Cir. 2024) (Walker, J., concurring) (“FINRA is likely a private entity exercising significant executive authority. If so, FINRA subverts the constitutional design.”). From an originalist perspective, as suggested by the U.S. Supreme Court’s decision in SEC v. Jarkesy, 603 U.S. 109 (2024), the answer may well turn on whether the 1792 Buttonwood Agreement (which founded the New York Stock Exchange) foreshadowed the quasi-public role of SROs in regulating and disciplining members. See, e.g., Brief for Respondent, Smith v. SEC, No. 24-3907 (6th Cir. July 10, 2025), 2025 WL 2023492 at *65 (asserting “there is an ‘unbroken tradition,’ as old as the republic, of private, self-regulatory organizations conducting their own procedures to decide whether their own members have violated applicable standards and, if so, whether they should be disciplined according to the rules of the private organization”).
• 121 F.4th at 1326–28 (Walker, J., concurring) (suggesting that this structure “falls short of what the private nondelegation doctrine requires: an accountable government actor that ‘retains the discretion to approve, disapprove, or modify’ FINRA’s delegated decisions”).
• Id. at 1345 (Walker, J., concurring) (questioning “the vast array of powers that FINRA exercises before the matter even reaches the SEC”).
• See SRO Concept Release, supra note 2, at 71275–82 (discussing alternative approaches to industry self-regulation). Under Chair Gensler, the SEC proposed to federalize a range of business conduct and sales practice rules; the SEC has since withdrawn those rule proposals. See Withdrawal of Proposed Regulatory Actions, Securities Act Release No. 11377, 90 Fed. Reg. 25531 (June 17, 2025) (withdrawing proposed rules relating to conflicts of interest associated with predictive data analytics, best execution, order competition, and cybersecurity risk management, among others).
• See Consolidation of NASD with the Member Firm Regulatory Functions of the NYSE: Working Towards Improved Regulation, Hearing Before the Subcommittee on Securities, Insurance, and Investment of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, May 17, 2007 (testimony of Erik R. Sirri, Director, Division of Market Regulation, U.S. Securities & Exchange Commission). The Exchange Act formalized delegation of certain responsibilities as well. See 15 U.S.C. § 78q(d)(1) (designation of examination authority for compliance with financial responsibility rules) & (2) (programs for allocation of regulatory responsibility).
• Karmel, Seats into Shares, 53 Hastings L.J. at 425; Consolidation of NASD and the Regulatory Functions of the NYSE: Hearing Before the Subcommittee on Securities, Insurance, and Investment of the Securities Committee on Banking, Housing, and Urban Affairs, 110th Cong. (2007) (testimony of Mary L. Schapiro, Chairman and CEO, NASD), available at https://perma.cc/DQ96-SDRE.
• See, e.g., Lindsey M. Burke, Department of Education, in Mandate for Leadership, supra note 35, at 355 (recommending that the executive “attack[] the accreditation cartel” by encouraging the launch of new accreditors and refusing to recognize accreditors “that abuse their power”); Birdthistle & Henderson, supra note 130, 99 Cornell L. Rev. at 49–50, 66–68 (discussing the benefits of “cultivating regulatory competition” among SROs).
• See, e.g., Birdthistle & Henderson, supra note 130, at 67–68.
• FINRA Rule 5310, Best Execution and Interpositioning (requiring members to use “reasonable diligence to ascertain the best market for the subject security and buy or sell in such market so that the resultant price to the customer is as favorable as possible under prevailing market conditions”).
• 17 C.F.R. § 242.611 (requiring trading centers to “establish, maintain, and enforce written policies and procedures that are reasonably designed to prevent trade-throughs on that trading center of protected quotations in NMS stocks”); see also Order Competition Rule, 88 Fed. Reg. 128, 142 (Jan. 3, 2023) (discussing the relationship between the common law duty of best execution and the Commission’s order handling rules).
• See id., 88 Fed. Reg. at 245 (proposing Rule 615); Regulation Best Execution, 88 Fed. Reg. 5440 (Jan. 27, 2023) (proposed to be codified at 17 C.F.R. pts. 240 & 242). As described by the SEC, “Proposed Rule 615 would [have required] that certain orders of individual investors be exposed to competition in fair and open auctions, before such orders could be executed internally by trading centers that restrict order-by-order competition.” Id. at 129.
• See Withdrawal of Proposed Regulatory Actions, supra note 149, 90 Fed. Reg. at  25532 (withdrawing proposed Regulation Best Execution and proposed Rule 615); U.S. Securities & Exchange Commission, Press Release, SEC Announces Roundtable on Trade-Through Prohibitions, No. 2025-99 (July 21, 2025), https://www.sec.gov/newsroom/press-releases/2025-99-sec-announces-roundtable-trade-through-prohibitions.
• Angel et al., supra note 10, at 30–33 (discussing the “trade-at” proposal of the Joint SEC/CFTC Advisory Committee on Emerging Regulatory Issues). For a discussion of the tension between traditional common-law and SRO best execution duties and the order handling rules under the national market system, see generally Allen Ferrell, A Proposal for Solving the “Payment for Order Flow” Problem, 74 S. Cal. L. Rev. 1027, 1051–52 (2001); Jonathan R. Macey & Maureen O’Hara, The Law and Economics of Best Execution, 6 J. Fin. Intermediation 188 (1997).
• See Wikipedia, Betteridge’s Law of Headlines, https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines (last visited July 29, 2025).
• See, e.g., Angel et al., supra note 10, at 35 (suggesting that “[s]uch changes should be guided by sound economic and legal principles when their application is well understood,” or alternatively, though “pilot studies and policy phase-ins that can produce additional economic evidence”).
• See, e.g., NYSE LLC v. SEC, 962 F.3d 541, 555 (D.C. Cir. 2020) (holding that the Exchange Act does not delegate the SEC “authority to promulgate a ‘one-off’ [pilot program] that imposes significant, costly, and disparate regulatory requirements merely to secure information that may or may not indicate to the SEC whether there is a problem worthy of regulation”); John C. Coates IV, Cost-Benefit Analysis of Financial Regulation: Case Studies and Implications, 124 Yale L.J. 882, 1009 (2015).
• Mark J. Roe, Delaware’s Competition, 117 Harv. L. Rev. 588, 639 (2003) (arguing that competition in American corporate law occurs within “two limited ranges: first, where the federal authorities have left the field and convincingly display no interest in coming back, and second, where . . . there is a band in which they can maneuver without provoking any federal reaction”).
• Jonathan Macey & Caroline Novogrod, Enforcing Self-Regulatory Organization’s Penalties and the Nature of Self-Regulation, 40 Hofstra L. Rev. 963, 967 (2012).
• See, e.g., Exchange Act Release No. 56148, 72 Fed. Reg. 42146, 42148 (Aug. 1, 2007) (discussing the scope of SRO responsibilities retained by the NYSE). FINRA charges membership fees to finance the cost of supervision and enforcement and does not anticipate revenues from fines for budgetary purposes. Moreover, FINRA allocates revenues actually earned from fines to limited purposes. See FINRA, Report on Use of 2024 Fine Monies (May 30, 2025), https://www.finra.org/about/annual-reports/report-use-2024-fine-monies.
• Brokerage firms generally require customers to agree to pre-dispute arbitration in lieu of suing in federal or state court, though customers also have the right to request arbitration in FINRA’s arbitration forum. FINRA Rules 2268 and 12200.
• 15 U.S.C. § 78s(d)–(f).
• Fiero v. FINRA, 660 F.3d 569, 574 (2d Cir. 2011); see also text accompanying notes 138–141 supra (discussing potential limitations on FINRA’s power to impose expulsion as a penalty without an opportunity for SEC review).
• Contrast Nicole Iannarone, Investor Justice, 109 Minn. L. Rev. 1153, 1181 (2025) (arguing that “forced securities arbitration uniquely impacts small claims investors and diminishes their access to justice”) with Jill I. Gross, McMahon Turns Twenty: The Regulation of Fairness in Securities Arbitration, 76 U. Cin. L. Rev. 493, 518 (2008) (suggesting that “criticisms of the fairness of securities arbitration stem primarily from misunderstandings as to the law, not to defects in the arbitration process or failures of the arbitrators”). The differences between SRO rulemaking and actionable federal and state laws complicate matters further. Id.
• Macey & Novogrod, supra note 155, 996–1000 (discussing the economics of sanctioning broker-dealers).
• See, e.g., FINRA, 2025 FINRA Annual Regulatory Oversight Report, Jan. 2025, https://www.finra.org/sites/default/files/2025-01/2025-annual-regulatory-oversight-report.pdf; FINRA, Sanctions Guidelines (March 2024), https://www.finra.org/sites/default/files/Sanctions_Guidelines.pdf (setting forth sanctions guidelines by rule violation).
• See, e.g., Project 2025, supra note 35, at 836 (suggesting that “FINRA arbitrators [be required] to make findings of fact based on the evidentiary record and demonstrate how those facts led to the award given (except with respect to very small claims). These written FINRA arbitration decisions should be subject to SEC review and limited judicial review.”).
• Macey & Novogrod, supra note 155, 996–1000. One study revealed a pattern of individuals abandoning their brokerage licenses to do business as investment advisors, insurance brokers, or other adjacent businesses without direct SEC or SRO supervision. Colleen Honigsberg, Edwin Hu & Robert J. Jackson, Jr., Regulatory Arbitrage and the Persistence of Financial Misconduct, 74 Stan. L. Rev. 737, 743 (2022). Some of these individuals have been suspended or banned for disciplinary violations and are permitted to enter comparable jobs for lack of better regulatory diligence by state authorities.
• Burton, Reforming FINRA, supra note 133.
• 15 U.S.C. § 78o(o) (granting authority to restrict mandatory arbitration).
• See Delaware Court of Chancery, Mediation Guideline Pamphlet (rev. July 2023), https://perma.cc/M8UV-6YR2 (offering voluntary mediation services by sitting members of the Delaware Court of Chancery).
• 15 U.S.C. § 78s(b)−(h).
• Burton, supra note 35, at 835–36.
• See FINRA, FINRA Rulemaking Process, https://perma.cc/ZTB2-WKXU (discussing FINRA’s rulemaking process, including internal cost-benefit analysis and presentation in a gantlet of committees, circulars to members, and industry conferences).
• 15 U.S.C. § 78s(b)(2) (imposing various timeframes for action on SRO rule proposals).
• See, e.g., Angel et al., supra note 10, at 23–24.
• S. Rep. No. 111-176, at 106 (2010) (quoting letter dated November 24, 2009, from four exchange groups arguing that the rule preapproval process gave “a significant competitive advantage to [their] less regulated competitors, which do not have to seek regulatory approval before changing their rules”).
• See, e.g., James Fallows Tierney, Overseeing Private Rulemaking: Evidence from SEC Review of SRO Rules, U. Pa. J. Bus. L. 589, 636−640 (2025) (discussing exchanges’ incentive “to leverage regulatory structures to their advantage” as a result of demutualization and financialization); see also note 91 supra (discussing review of exchange rules for anti-competitive behavior).
• See 15 U.S.C. § 78s(b)(3)(A) (eliminating prior SEC review and approval of SRO rules setting market data fees by making such rule changes take effect upon filing); note 125 supra (discussing unreviewability of SRO market data fees absent SEC action).
• See Birdthistle & Henderson, supra note 130, at 68 (suggesting that “[i]f the number of SROs operating in any particular financial sector could be increased, then the dynamics of competition might work to produce something closer to an optimal blend of ‘self’ in self-regulatory organizations”).
• CTA Symbol File, Consolidated Tape Association, https://perma.cc/3HMU-2VTJ (last visited Aug. 5, 2025).
• Nasdaq Trader Symbol Directory, Nasdaq, Inc., https://perma.cc/V7ZJ-NGFZ(last visited Aug. 5, 2025).
• U.S. Equities Market Volume Summary, Cboe,  https://perma.cc/2PBB-LH4H (last visited Nov. 28, 2025) (five-day average notional volume as of Aug. 5, 2025).
• U.S. Equities Market Share Charts (Tape A),  Cboe, https://perma.cc/433L-PL27 (last visited Nov. 28, 2025).
• U.S. Equities Market Share Charts (Tape B), Cboe, https://perma.cc/Y27V-8CNW (last visited Nov. 28, 2025).
• U.S. Equities Market Share Charts (Tape C), Cboe, https://perma.cc/YCP7-SMV5 (last visited Nov. 28, 2025).
• FINRA & TRF volume represents, inter alia, orders executed by “dark pools” (ATSs) and internalized by market-makers, which are reported through a trade reporting facility.
• Consolidated Tape Association, https://perma.cc/N4EY-7RJ9.
• Revenue Disclosure, UTP Plan Administration, https://perma.cc/26WT-RSMX.