A group of nine financial companies has announced plans to launch their own trading market.
A group of nine financial companies has come forward with plans to launch their own trading market dubbed the Members Exchange, aiming to bypass the New York Stock Exchange and the Nasdaq.
The goal, according to the founding members, is to reduce costs and simplify trading.
The firms include Morgan Stanley, Fidelity Investment, UBS, and Bank of America Merrill Lynch.
Approval is not expected until at least 2020, but the firms, which will enjoy collective ownership, said they would file papers with the US market regulator, the Securities and Exchange Commission, early this year.
Douglas Cifu, Chief Executive of another firm involved in the Members Exchange, Virtu Financial, was quoted by the BBC as saying: “The launching of MEMX is a testament to the market-wide demand for competition, innovation, and transparency.”
At the same time, the World Federation of Exchanges (WFE), which represents companies that operate exchanges, defended the current system in a statement Monday, saying exchanges create the data and set fees based on its value to the customer.
The idea has been tried before. In 2008, investment banks in Europe set up an exchange called Turquoise, in a similar effort to increase competition. Although loss-making, it gained a 7% share of the market before being taken over by the London Stock Exchange.
In the US, the IEX Group launched a new national stock exchange in 2016. Known as the Investors Exchange, it currently claims about 2.6% of the market.
Three big companies dominate the rest of the market: the Nasdaq; the Intercontinental Exchange, which runs the New York Stock Exchange; and the CBOE, which focuses more on options contracts and currency exchanges.
Shares in Intercontinental Exchange fell more than 2% after the Members Exchange announcement on Monday. Shares in Nasdaq dropped 2.6% while the CBOE fell 1.9%.