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The United States will soon have a new stock exchange: government authorities have approved (pdf) the Long-Term Trading Bid (LTSE), a trading platform supported by Silicon Valley personalities. The company says its rules are designed to reward long-term investments and business strategies.
The Securities and Exchange Commission today decided to give LTSE the green light to become a national stock exchange, which will allow it to list itself and become a place to buy and sell shares. . "We are building a market where companies are rewarded for choosing to innovate, invest in their people and drive future growth," said Eric Ries, CEO of LTSE, in a statement.
Ries is an entrepreneur from San Francisco and author of The lean start, a book in which he pleads for the creation of an exchange like LTSE. One of the platform's unique and potentially contentious proposals is to focus on long-term voting rights: the idea is that shareholders will have more voting power the more they will hold shares. Steve Goldstein, a spokesperson for LTSE, said the exchange would also focus on governance standards such as sustainability, executive pay and diversity.
The next step in the exchange is to submit its rating standards to the SEC. Goldstein said that the precise rules are still being formulated, but the stock market is waiting to accept customers by the end of the year.
Based in San Francisco, LTSE will become the 14th largest stock market in the country. US equity trades are dominated by the NYSE, Nasdaq and Cboe markets, which together account for more than 60% of volume. IEX, an exchange known for his role in Michael Lewis's book Flash Boys, was approved as a national stock exchange in 2016; it currently accounts for approximately 3% of US equity transactions.
LTSE is not the only exchange seeking regulatory approval. In January, banks, brokerages and trading companies announced plans for their own exchange of members. The addition of new trading platforms aggravates the complexity of the already fragmented US stock market.
US technology companies, many of which are from the west coast, have long been concerned about the listing process, which is dominated by investment banks and Wall Street stock exchanges on the east coast. Their concerns include things like high frequency trading (HFT), activist investors and the push for quarterly short-term results at the expense of longer-term sustainable growth. The for-profit company behind LTSE raised funds from leading technology investors, including venture capital Marc Andreessen, and Peter Thiel's Founders Fund.
Some will probably wonder if public markets are really too focused on the short term, since investors have been very receptive to the listings of money – losing businesses in the last few quarters. And the Board of Institutional Investors argued (pdf) that the voting mechanism of LTSE could hurt shareholders by giving too much power to the founders. Silicon Valley's stakeholders, who will be a target market for emerging markets, have "warmed up" to LTSE's ideas, Goldstein said.
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