June 4, 2024 at 8:00 pm ET

A group backed by Wall Street heavyweights BlackRock BLK 1.02%increase; green up pointing triangle and Citadel Securities is planning to start a new national stock exchange in Texas, aiming to take on what they see as onerous regulation at the New York Stock Exchange and Nasdaq.

The Texas Stock Exchange, which has raised approximately $120 million from individuals and large investment firms, plans to file registration documents with the Securities and Exchange Commission later this year, CEO James Lee told The Wall Street Journal. The goal is to begin facilitating trades in 2025 and host its first listing in 2026.

The exchange is aiming to tap in to disaffection with increasing compliance costs at Nasdaq and NYSE and newer rules like one setting targets for board diversity at Nasdaq. Backers of the TXSE, as it is known, pledge it will be more CEO-friendly.

Also behind the move is a shifting U.S. corporate landscape, with dozens of companies moving to states with more favorable regulatory and taxation policies. Texas is now home to more Fortune 500 companies, including Exxon Mobil, AT&T and American Airlines, than any other state. Goldman Sachs broke ground last year on a Dallas campus that it said could house more than 5,000 employees.

“Dallas has become one of, if not the most, dominant financial centers in the country, if not the world,” Lee said.

For months, talk has been swirling in trading communities about an upstart, “anti-woke” exchange launching in Texas. Lee says the exchange is apolitical.

TXSE will be entirely electronic, but it plans to have a physical presence in downtown Dallas, said Lee, a Texan who has worked in finance and trading for around three decades. The exchange plans to compete for primary and dual listings. The TXSE also hopes to attract listings of exchange-traded products.

Getting the new exchange off the ground would be no mean feat. NYSE and Nasdaq have an effective duopoly in U.S. corporate stock listings. Other exchanges, including IEX and Cboe Global Markets, have tried to break into the stock-listings business but they have gained little traction. The Long-Term Stock Exchange, which was approved by the SEC in 2019, has two listings.

Decades ago, there were dozens of regional stock exchanges outside of New York, but they either shut down or were acquired by larger players. The Boston Stock Exchange, the Chicago Stock Exchange and the Philadelphia Stock Exchange are among those that were folded into the parent companies of the NYSE and Nasdaq in the last 20 years.

The New York Stock Exchange effectively operates a duopoly alongside Nasdaq for U.S. stock listings. Photo: Peter Morgan/Associated Press

Attracting trading volumes to a new exchange is also challenging. Traders often direct orders to exchanges that have the greatest volumes. TXSE hopes its backers will help.

Citadel Securities is one of the world’s biggest electronic-trading firms, and BlackRock is the world’s largest asset-management firm. BlackRock and Citadel Securities have a history of backing upstart exchanges, including MEMX, which handles between 2% and 3% of the stock market’s volume, according to Cboe data.

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Upstarts also benefit from SEC rules that effectively force large brokers to link to every exchange—even ones that have small market share—and pay for connections and market data.

This isn’t the first attempt to bring more financial business to the Lone Star State. Texas Gov. Greg Abbott, a Republican, met with exchange officials in 2020 to pitch a move by their electronic-trading centers to the state from New Jersey, which at the time was considering a tax on financial transactions. The move never materialized.

The newly formed Texas Business Courts, established as an alternative to the Delaware Court of Chancery system, is another sign of the state’s growing stature, Lee said.

The courts are center stage right now as Elon Musk’s Tesla holds a shareholder vote on whether to move its incorporation to Texas from Delaware.

“Never incorporate your company in the state of Delaware,” Musk tweeted after the Delaware Court of Chancery struck down his multibillion-dollar pay package earlier this year.

Alexander Osipovich contributed to this article.

Write to Corrie Driebusch at corrie.driebusch@wsj.com