NEW YORK—Morgan Stanley, Fidelity Investments, Citadel Securities LLC, and a host of other financial companies have agreed to jointly launch a new low-cost bourse that will compete with the New York Stock Exchange and Nasdaq.
In a joint statement on Jan. 7, the companies said the new exchange would look to increase competition, improve operational transparency, reduce fixed costs and simplify equity trading in the United States.
The venture will be called Members Exchange, or MEMX, and will be funded and controlled by nine institutions, including Bank of America Merrill Lynch, Charles Schwab Corp, E*TRADE Financial Corp., TD Ameritrade Holdings Corp., UBS, and Virtu Financial.
The new exchange comes after years of complaints from brokers and traders over what they see as too high fees charged by U.S. stock exchanges for data on stock trades.
Last year, the U.S. Securities and Exchange Commission (SEC) asked stock exchanges to do a better job justifying their fees for public market data. It also repealed two data price changes last May for public feeds for Nasdaq and New York Stock Exchange-listed securities for the first time.
MEMX, which plans to offer a simple trading model with basic order types and the latest technology, will also represent the interests of its founders’ collective client base, comprised of retail and institutional investors.
It will offer “lower pricing on market data, and connectivity, and transaction fees,” it said.
The big three U.S. exchanges have faced criticism for surging fees for services like data feeds that brokers use to monitor movements in stock prices.
Intercontinental Exchange Inc (ICE) owns the New York Stock Exchange, Nasdaq is run by Nasdaq Inc. and the other exchange is Cboe Global Markets Inc.
Shares of ICE were down 2.6 percent and Nasdaq Inc. fell 2.8 percent.
MEMX will file an application seeking approval to operate as a national securities exchange with the U.S. SEC in early 2019, according to the statement.
The World Federation of Exchanges (WFE) hit back against criticism of bourses on Jan. 7, saying price feeds would not exist but for the role they play.
“The price at which information is licensed is accordingly a commercial matter for each individual consumer and exchange. The WFE stands ready to assist any regulators who are concerned about the role and nature of market data,” the WFE said.
Banks tried a similar move in Europe by setting up Turquoise to trade cross-border shares as a stick to persuade incumbent exchanges to cut data fees.
Turquoise partly succeeded in its aim, but ended up being bought by the London Stock Exchange.
By Diptendu Lahiri & Huw Jones