With Detroit well-established in 1907 as the automotive capital of the world, it was natural the Detroit Stock Exchange would emerge to allow local manufacturers of all kinds to sell stock to fund new factories and machinery.
While the Detroit exchange lasted until 1976 — it was a victim of deregulation — a movement today could set the stage for a return.
Part of the appeal of a local exchange in the first half of the last century was geography. With limited technology, buyers and sellers relied mostly on the local business market to research and make informed investment decisions.
That changed when the public markets embraced technology in the 1990s, using the internet to buy and sell stocks (and other securities). Prior to that, a telegraph receiver called the stock ticker printed a company’s current stock price on ticker tape.
With 55 public companies in Michigan listed on either the New York Stock Exchange or
Nasdaq, enterprises in the state have billions of dollars of investment power. From fintech to health care, manufacturing, and chemicals, most every enterprise has a need to raise funds to run and grow operations.
Over the last century, the NYSE and Nasdaq have become what some describe as a duopoly on corporate listings. But that has started to change in recent months as Elon Musk, dissatisfied with the investment markets in New York and the regulatory climate in Delaware, has moved Tesla’s incorporation to Texas from the nation’s First State.
He also conveyed SpaceX’s headquarters to Texas from Delaware, while X (formerly Twitter) and Neuralink Corp. are now established in Nevada. Part of the motivation behind moving Tesla to Texas stemmed from a Delaware judge voiding a $56 billion compensation package for Musk in January.
At the same time Musk was pulling out of New York and Delaware, the Texas Stock Exchange (TXSE) was formed by a group of investors — Black Rock, Citadel Securities, and others raised $120 million for the venture.
Later this year, the group plans to seek approval from the SEC to run the stock exchange out of Dallas. Musk tweeted the move “sounds promising.” Some of the largest corporations in Texas include American Airlines, AT&T, Comerica, and Exxon Mobil.
Whether a return of the Detroit Stock Exchange finds footing — few area corporations or investors are advocating for a local securities market — will depend on how successful the TXSE becomes. If it takes off, other regions and states will look at establishing local capital markets.
One thing going for the TXSE is that it allows participating companies to have dual listings;
other exchanges would likely match or expand such offerings. Fees for regulatory compliance offers another savings opportunity relative to New York and Delaware.
A locally based securities exchange not only would boost Detroit’s standing in the financial markets, but also draw investment and create jobs across multiple sectors. In addition, company leaders wouldn’t have to travel nearly as far to ring the day’s opening bell.
