09/17/2020

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MEMX, the New Exchange on the Block



MEMX Executes its First Trade

Yesterday morning, a new exchange called Members Exchange, or MEMX, executed its first trade. MEMX is backed by electronic trading firms, Wall Street banks, and other investors. To start out, the exchange will facilitate trades of seven stocks including Alphabet Inc. (GOOG), and ExxonMobil (XOM). Its first trade yesterday was of Consolidated Edison (ED) shares.

MEMX is based in New Jersey and has raised over $135 million from investors. It is expected that the new exchange will provide stiff competition for already existing exchanges.

Competing Against Established Exchanges

Just three exchange groups handle almost 60% of US equities trading volume. These groups are Nasdaq, Cboe Global Market (CBOE), and NYSE, which is owned by Intercontinental Exchange (ICE). These stock exchanges make money on transaction fees, listing fees, market data fees, and more.

MEMX was formed in response to banks and trading firms feeling frustrated by major exchanges raising prices for their services. MEMX plans to offer lower prices than the dominant exchanges, and will give away its data for free initially.

Other New Stock Exchanges

Often, new exchanges struggle because traders want to go where there are already other people to trade with. However, because MEMX has a significant store of cash, it plans to pay out more in rebates than it collects in transaction fees—at least to start out. This means that MEMX will lose money initially as it goes through the process of building its base.

In addition to MEMX, several other new exchanges are launching this month. The Long-Term Stock Exchange went live on September 17, and an exchange called MIAX Pearl, created by Miami International Holdings, will roll out on September 25. Investors will be eager to see how MEMX and these other new players impact the exchange landscape.


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