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Major Brokers to Form New Exchange to Rival Nasdaq, NYSE

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A group of nine Wall Street biggies and other retail broker-dealers are coming together to launch a new national securities exchange — MEMX or Members Exchange — with a view to cut costs that other exchanges charge for services.

Bank of America (BAC - Free Report) , E*TRADE Financial , Morgan Stanley (MS - Free Report) , TD Ameritrade (AMTD - Free Report) , UBS Group AG, Virtu Financial, Charles Schwab, Citadel Securities and Fidelity Investments are the names involved in the venture.

An application to operate as a national securities exchange is likely to be filed with the Securities and Exchange Commission in early 2019. However, the approval receiving process can be time consuming, and thus the exchange is less likely to go live before 2020.

Shares of Intercontinental Exchange (ICE - Free Report) , owner of NYSE, and Nasdaq (NDAQ - Free Report) have dropped 4.7% and 2.9%, respectively, since Monday after news of the rival exchange surfaced.

Exchanges such as NYSE and Nasdaq generate revenues by charging brokers for trading data, without which traders cannot conduct business. Thus, these firms are forming a new platform that will have fewer and simpler order types at lower costs. Though it is not clear as to how low these costs might be, it is expected to have a significant impact on competition.

These financial firms have come together with an aim to boost competition, improve operational transparency, lower fixed costs and simplify the execution of equity trading in the United States.

Steve Quirk, executive vice president at TD Ameritrade believes that the new exchange initiative would transform markets for better. He said. "All types of investors could benefit from this simplified investing experience that will foster competition and promote practices that put the needs of investors first."

"Participants in today's equity markets deserve an innovative alternative that is aligned with their interests, which is why we are pleased to support the launch of this new trading platform," said Vlad Khandros, managing director at UBS.

Of the above-mentioned companies, Bank of America, E*TRADE Financial and TD Ameritrade carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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