Market Overview

Morgan Stanley, Fidelity, Others Back Low-Cost Exchange To Compete With NYSE, Nasdaq

Morgan Stanley, Fidelity, Others Back Low-Cost Exchange To Compete With NYSE, Nasdaq

Shares of Nasdaq Inc. (NASDAQ: NDAQ) and NYSE parent Intercontinental Exchange Inc. (NYSE: ICE) were trading lower Monday morning after the Wall Street Journal reported that several leading financial services firms are developing a rival exchange.

What Happened

A group led by Morgan Stanley (NYSE: MS), Fidelity Investments and Citadel Securities is developing Members Exchange — MEMX — a new securities exchange that plans to file for SEC approval, the newspaper said in a Monday story. 

Why It’s Important

If approved, the new exchange could take business away from the Nasdaq and the NYSE. It could also force the two established exchanges to lower their fees, which could eat into earnings and margins.

In a statement, Members Exchange said its goals include lowering costs, increasing competition, boosting transparency and simplifying the trading process. Brokers and traders have frequently criticized the NYSE and the Nasdaq for their rising fees in recent years.

The NYSE and the Nasdaq are responsible for about 98 percent of trading volume in U.S. equities, with independent IEX Group accounting for the other 2 percent.

Given the companies involved in the new Members Exchange — including Bank of America Corp (NYSE: BAC), E*TRADE Financial Corp (NASDAQ: ETFC), TD Ameritrade Holding Corp. (NASDAQ: AMTD) and others — the Nasdaq/NYSE duopoly could soon face a credible threat. 

What’s Next

Traders and brokers will be watching for the Members Exchange SEC filing. Given the heavy hitters involved in the project, it’s likely the application will be approved — and Intercontinental and Nasdaq investors will be paying close attention to the potential impact on industry pricing.

Related Links:

A Brokerage Trade: UBS Upgrades TD Ameritrade, Downgrades Charles Schwab

Veteran Trader Talks JPMorgan, Brokerages And Order Flow: Majority Of The Money Is Now Being Made In Kickbacks

Posted-In: Members Exchange Wall Street JournalNews Rumors Media Best of Benzinga


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