Miax joins challengers to dominant US exchange operators

New bourse is targeting a 5 per cent share of the US equity market

UBS, Citadel Securities and Jump Trading are among the investors in Miax Pearl Equities, the new US bourse that aims to break into a market dominated by the New York Stock Exchange, Nasdaq and Cboe Global Markets.

The group’s parent company, Miami International Holdings, will incentivise a group of nine investors, mainly high-speed market makers, to help boost the fledgling exchange’s market share over a 42-month period.

If the expansion programme is successful, Miax will have carved out at least 5 per cent of the US equity market, where about 11bn trades are handled daily, according to Cboe. The group is one of three new stock exchanges that are launching in quick succession this month that are aiming to redraw the structure of the world’s largest equity market.

MEMX, supported by big Wall Street firms such as Citadel Securities, BlackRock, JPMorgan Chase and Goldman Sachs, will launch on September 21, following in the steps of Long Term Stock Exchange, a San Francisco-based bourse, which opened for business last Wednesday.

Miax’s launch, on September 25, will bring the number of full exchanges in the US to 16. However 12 of these are collectively owned by NYSE, Nasdaq and Cboe, and they account for almost 60 per cent of trading volumes in the US cash equities market.

The rocket fuel for the exchange is market share and you need that fuel to get relevantThomas Gallagher, chief executive of Miami International Holdings and Miax

The newcomers hope to seize on customer dissatisfaction with these big three exchanges over the cost of market data, covering core information such as the prices offered and paid for a particular stock or the sizes of trades.

The investments are structured as pre-paid fee units and are based on each participant bringing in a quarter per cent market share and begin in January. That will raise $22m for the exchange. The investors would take equity in Miax in return if successful.

Hudson River Trading, Simplex Trading and Susquehanna Securities have also participated in the fundraising. MIH did not disclose the identities of the other participants. The companies are among the most active traders on US equity and options markets.

“The rocket fuel for the exchange is market share and you need that fuel to get relevant,” Thomas Gallagher, chief executive of MIH and Miax told the Financial Times.

It will be the group’s first equities exchange, after setting up three equity options exchanges in the US. The venues collectively have a share of some 15 per cent of the US option market, behind Nasdaq, NYSE and Cboe. 

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Mr Gallagher added that the addition of a stock exchange alongside options exchanges could allow Miax to be more competitive with the big exchanges. US rules allow exchanges to offer more advantageous pricing to customers if the exchange has a big enough market share.

Piper Sandler & Co acted as financial adviser to MIH.