BlackRock Inc. and Wells Fargo & Co. are throwing their weight behind the newest U.S. stock exchange.
As it gears up to take on the New York Stock Exchange, Nasdaq Inc. and Cboe Global Markets Inc. later this year, the Members Exchange, or MEMX LLC, has closed a more than $65 million round of funding. It included investments from the world's largest asset manager in BlackRock, one of the largest U.S. banks in Wells Fargo and a mix of other companies including Flow Traders NV, Manikay Partners LLC and Williams Trading LLC, according to a May 12 announcement. The round included previously disclosed investments from JPMorgan Chase & Co., Goldman Sachs Group Inc. and Jane Street Capital LLC as well. Broadhaven Capital Partners was MEMX's sole financial adviser on the transaction.
Now, MEMX's support on Wall Street includes 17 of the largest U.S. banks, retail brokerages, trading companies, and, with BlackRock, the world's largest buy-side institution.
"We set out to build an exchange for all," MEMX CEO Jonathan Kellner said in an interview. "Having an actual representative from the buy side in the room makes a difference."
Founded in early 2019 by nine of the biggest names in finance — Morgan Stanley, Charles Schwab Corp., TD Ameritrade Holding Corp., E*TRADE Financial Corp., Citadel Securities LLC, Virtu Financial Inc., UBS Group AG, Fidelity Investments and Bank of America — MEMX harks back to a long-gone era on Wall Street. It has raised more than $135 million to date.
Stock exchanges were once exclusively owned and operated by the companies, or members, that controlled trading on the venue. But that model has since fallen to the wayside with stock exchange giants Nasdaq, Cboe and Intercontinental Exchange Inc., which owns NYSE, all operating as publicly traded companies. IEX Group Inc. runs the only active independent stock exchange in the U.S.
MEMX is now targeting the third quarter to launch its low-cost and simplified stock exchange after COVID-19 disrupted its original timeline. The exchange does not have a specific need or plan for the funds it raised, Kellner said. The strategic value that MEMX's new investors bring to the table far outweighs the money, he added.
BlackRock, for instance, will control a seat on the MEMX board as part of its investment and provide the exchange with a direct line into the investor community.
The launch will come after years of rising tensions between the brokerage community and stock exchanges.
Broker/dealers have long complained that NYSE, Nasdaq and Cboe use their positions in the market to charge unfairly high costs for trading data that become burdens of entry for smaller trading shops. The exchanges say their pricing models are appropriate given the competitive playing field they operate within. MEMX has said it does not have immediate plans to charge for market data once its launches, in part as a play to snatch up market share from the larger exchanges.
It is not the only stock exchange planning to go live in 2020 and take on the incumbents, either.
Long-Term Stock Exchange Inc., a corporate governance-focused venue supported by some of the biggest investors in Silicon Valley, was approved in 2019 to launch the 14th national securities exchange in the U.S. LTSE had planned on launching at the end of the first quarter, but it has pushed back that timetable several times with the COVID-19 pandemic lingering on. Meanwhile, Miami International Holdings Inc., an options exchange operator, is waiting for the Securities and Exchange Commission to sign off on its equity exchange application. That decision is expected to come down May 12.