/>iIntroduction
On April 4, 2025, the Texas Stock Exchange (“TXSE”) published its Form 1 application submitted to the Securities and Exchange Commission (“SEC”) to register as a national securities exchange. The TXSE’s proposed listing standards are outlined in Exhibit B of the submission. If the SEC approves the application, according to TXSE, it will become the first fully integrated US national exchange in over 25 years, providing a new venue for company listings. With the release of the proposed listing standards, the TXSE provides a preliminary look into its operations, allowing for meaningful comparisons with established exchanges like the New York Stock Exchange (“NYSE”) and Nasdaq.
Overview and Context
On June 5, 2024, the TXSE announced its aim to be a premier national stock exchange based in Dallas, offering a fully electronic trading platform with high-quality standards for US and global companies accessing American equity markets. Major institutions have financially backed the exchange, and the TXSE intends to leverage Texas’s substantial economic strength as home to a $2.7 trillion economy and more than 50 Fortune 500 companies, representing one in ten publicly traded US companies. Filing their Form 1 application was a critical step in the direction of meeting TXSE's goal of launching in 2026. Upon launch, the exchange initially plans to focus on only allowing dual listings for companies already listed on another exchange, with original listings expected to be offered at a later date (Exhibit N of the Form 1 filing).
Currently, the NYSE and Nasdaq are the two largest and most established national securities exchanges in the US. While both exchanges are regulated by the SEC and impose similar corporate governance requirements, their quantitative listing standards differ in structure and thresholds. The NYSE operates its primary listing segment, which is typically geared toward larger, well-established public companies, and the NYSE American, which has lower financial thresholds and is more accessible to smaller cap issuers. Nasdaq, in turn, offers a three-tier structure: 1) Nasdaq Capital Market, 2) Nasdaq Global Market, and 3) Nasdaq Global Select Market. Each tier has increasing levels of financial and liquidity requirements. These tiers allow a broad range of companies, from early-stage growth issuers to mature businesses, to access the public markets under tailored standards.
The TXSE in contrast proposes a single-tier system with standards that indicate an intent to attract only mid- to large-cap issuers seeking an alternative listing venue.
Confidential Pre-Application and Review Thresholds
Unlike Nasdaq and NYSE, the TXSE mandates a formal confidential pre-application review before a company can formally apply to list securities on the exchange. Under proposed TXSE Rule 16.201(a), this review is mandatory (and free) for all initial listing applicants, and must be completed before a formal listing application is submitted. This structured, pre-filing assessment is intended to help both the issuer and the exchange determine listing eligibility early in the process, particularly for companies with non-traditional capital structures or from foreign jurisdictions. Nasdaq and NYSE provide confidential reviews only as requested (Nasdaq FAQs - Listings #328 and NYSE Listing Company Manual 104.00).
Core Quantitative Tests
All major US exchanges require companies to meet specific quantitative criteria for listing. The proposed TXSE rules allow companies to qualify under two different financial tests: 1) the Earnings Test and 2) the Global Market Capitalizations Test (Rule 16.310(c)), both of which are modeled closely on existing standards used by the NYSE and Nasdaq.
- The Earnings Test
Under the Earnings Test, a company must have generated aggregate pre-tax earnings of either (i) at least $10 million over the past three fiscal years with a minimum of $2 million in each of the two most recent years, and positive earnings in all three fiscal years or (ii) $12 million over the past three fiscal years, with at least $5 million in the most recent fiscal year and $2 million in the second most recent fiscal year. Alternatively, companies classified as Emerging Growth Companies may qualify with $10 million in aggregate pre-tax earnings over two fiscal years, provided they earned at least $2 million in each fiscal year. This framework aligns closely with the NYSE’s Earnings Test and Nasdaq Global Select Market’s Earnings Standards.
- The Global Market Capitalization Test
For companies that are not yet profitable but have strong market performance, TXSE also offers a Global Market Capitalization Test. This pathway requires a minimum market capitalization of $200 million, and a minimum bid price of $4.00, sustained for at least 90 consecutive trading days. These requirements reflect a close alignment with the NYSE’s Global Market Capitalization test and a similarity with Nasdaq’s Market Value standards, both of which are commonly used by companies with strong investor demand but limited earnings history.
Companies must also meet additional distribution criteria to list on the TXSE, including at least 400 round-lot shareholders (i.e., investors holding 100 or more shares), a minimum of 1.1 million publicly held shares, a public float of $40 million, and at least four market makers to support trading activity (Rule 16.310(a)).
By combining both earnings and valuation-based pathways, TXSE’s proposed framework is designed to accommodate a range of mid-to-large-cap issuers. At the same time, its relatively high thresholds, particularly for market capitalization and public float, distinguish it from Nasdaq’s lower-tier Capital Market, which allows for smaller issuers with equity as low as $5 million and bid prices as low as $2.00.
Foreign Private Issuers / Non-US Companies
Foreign private issuers (or non-US companies; both are used interchangeably in the proposed listing standards) have an alternative standard, though they can opt for TXSE’s domestic criteria. The alternative listing standard only applies where there is a broad liquid market for the company’s shares in its country of domicile (Rule 16.312(a)(8)). Under this alternative listing standard, a company must have at least 5,000 worldwide round lot shareholders, with 2.5 million shares publicly held, and a market value of publicly held shares at $100 million worldwide (or $60 million for companies under Affiliated Company Test). In addition, the companies must meet one of the financial tests: 1) Earnings Test, 2) Valuation / Revenue Test, or 3) Affiliated Company Test (Rule 16.312(b)(2)).
- The Earnings Test
Under the Earnings Test, a non-US company must have generated aggregate pre-tax earnings of at least $100 million in aggregate over the past three fiscal years with a minimum of $25 million in each of the two most recent years. Non-US companies that qualify as Emerging Growth Companies must also meet the same financial standard.
- The Valuation / Revenue Test
Under the Valuation / Revenue Test, a non-US company can list in two ways. First, if it has at least $500 million in global market capitalization, generated at least $100 million in revenues during the most recent twelve-month period and at least $100 million in aggregate cash flows for the last three fiscal years, where each of the two most recent years is reported at a minimum of $25 million. The second way to qualify under this financial standard is for a company to have at least $750 million in global market capitalization and at least $75 million in revenues during the most recent fiscal year.
- The Affiliated Company Test
Under the Affiliated Company Test, the company must at least have $500 million in global market capitalization, have at least a 12 month operating history (although a Company is not required to have been a separate corporate entity for such period); AND the Company’s parent or affiliated company is listed in good standing (as evidenced by written representation from the Company or its financial advisor excluding that portion of the balance sheet attributable to the new entity) as well as the Company’s parent or affiliated company retains control of the entity or is under common control with the entity.
These financial standards mirror the NYSE’s quantitative initial listing standards for non-US companies.
Governance and Phase-In Provisions
Stock exchange listing standards, SEC regulations and state corporate law shape corporate governance for public companies. While TXSE's proposed quantitative standards are at times more stringent than the NYSE and Nasdaq, its corporate governance guidelines closely align with existing frameworks. This alignment makes sense because SEC rules guide many governance requirements, which include the recent clawback provisions that apply to all national stock exchanges and have been included in the proposed TXSE listing rules (TXSE Rule 16.409).
Further facilitating compliance, all three exchanges offer phase-in periods for newly public companies. TXSE’s proposed rules grant issuers up to one year to meet board and committee independence requirements, similar to the transitional relief provided by Nasdaq and NYSE (Nasdaq Rule 5615(b)(1)) and NYSE Listed Company Manual Section 303A). For instance, Nasdaq mandates a newly listed IPO to have at least one independent director upon listing, a majority within a year, and full audit committee compliance within the same timeframe, with interim thresholds at 90 days (Rule 5605(c)(4)). NYSE follows a nearly identical path, allowing phased compliance with audit, compensation, and nominating committee independence requirements. TXSE’s Form 1 filing adopts these norms extensively, signaling its intention to align with accepted US market practices and facilitate onboarding for first-time issuers.
Additionally, since NYSE and Nasdaq governance rules are neutral on environmental, social, and governance (“ESG”) issues, the TXSE's similar stance further reflects adherence to established practices, ensuring robust oversight while offering a new venue for public listings. However, Texas has recently taken a more assertive stance on shareholder rights outside the exchange framework. On May 19, 2025, Governor Greg Abbott signed Senate Bill 1057 into law, allowing “nationally listed corporations” based in Texas or listed on a Texas exchange to impose significantly higher thresholds on shareholders seeking to submit proposals for a vote at annual or special meetings. Although this state-level development is not part of TXSE’s listing rules, it indicates Texas’s broader intent to foster a more management-friendly governance environment and the key role the TXSE is intended to play in that ecosystem. For more information on recent changes to Texas corporate law, see: link.
Delisting and Reverse-Split Interplay
Each exchange uses a structured process to manage continued listing deficiencies when a listed company’s share price falls below the minimum standards, with listed companies frequently employing reverse stock splits to cure bid-price non-compliance and avoid delisting. On Nasdaq, if a company’s share price closes below $1.00 for 30 consecutive business days, it receives a deficiency notice and typically has 180 calendar days to regain compliance (Nasdaq Rule 5810(c)(3)(A)). Companies often implement reverse stock splits to increase the bid price and must then maintain a closing bid of $1.00 or more for at least 10 consecutive business days to cure the deficiency. NYSE follows a similar structure under Section 802.01, requiring companies with a sub-$1.00 average closing price to regain compliance within six months, typically through a reverse stock split. In contrast, the proposed TXSE sets a higher minimum bid price of $4.00, which could increase the frequency of reverse stock splits or cause companies to implement reverse stock splits at an earlier stage. This would also prevent currently listed companies with a stock price between $1.00 and $4.00 from seeking a dual listing on the TXSE without effecting a reverse stock split. Like NYSE and Nasdaq, the TXSE limits excessive stock splits (TXSE 16.501(d)(3)(A)(ii)). Like Nasdaq and NYSE, TXSE also provides for a cure period and appeal process before delisting, with rules designed to prevent involuntary delisting where corrective action is possible (TXSE proposed Rule 16.501(d)(3), Nasdaq Rule 5810 and NYSE Listing Manual 802.01C).
Conclusion
TXSE’s proposed standards expand the US exchange landscape, providing an innovative venue with robust requirements. By integrating familiar financial tests and governance provisions while introducing unique elements like a mandatory pre-application review and higher quantitative thresholds, TXSE seeks to attract mid-to-large-cap issuers and mature companies looking for an alternative listing option. The exchange’s alignment with established practices from NYSE and Nasdaq offers competitive yet distinct offerings. As the SEC reviews TXSE’s application, companies interested in leveraging its platform should consider the opportunities and challenges presented by its distinctive standards.
