SEC to Review Application for New Equity Exchange Focused on Sustainability
Commentary by Glen Barrentine
The SEC requested comments on an application by a new equity trading platform "seeking approval as the first stock market in the U.S. dedicated to the emerging $50+ trillion global green economy."
According to the company's announcement, the "trading platform will be powered by state-of-the-art technology, ... [and] will offer non-tiered, competitive liquidity and quoting programs for members and market makers, ... [and,] as part of the National Market System (NMS), ... will ensure best execution for all trades directed or routed to the exchange."
In its application, the new exchange stated that it would have a membership system, open only to registered broker-dealers. To list on the exchange, companies must meet the platform's "Green Governance Standards," which are intended to demonstrate to investors that listed companies focused on green initiatives are credible.
Comments must be submitted within 45 days of the publication of the Notice in the Federal Register.
Commentary
The new exchange is novel in that, if approved, it would only list companies that comply with the exchange's "Green Governance Standards." These standards "will be designed to provide transparency and accountability for listed companies' green and sustainability promises and signal to investors focused on green practices that listed companies are credible." In other words, a listing on the new exchange would operate as a seal of approval.
This approach likely reflects the fact that, from a trading perspective, it makes little difference on which exchange an issuer is listed. As a result of this increased commoditization of exchanges, it is not surprising that exchanges would seek other, none trading related, means of trying to differentiate themselves.
Of course, it remains to be seen whether this new approach might be successful in drawing listing companies away from the current NYSE/NASDAQ duopoly that now dominates listings in the US. If it is, however, it is likely we will see other exchanges attempt to copy this approach either in the green market itself or in other niches.