Birds of a feather?
How LTSE will (and will not) be like other stock exchanges
They have their businesses and we have ours, which is to enable bold, visionary companies to thrive
“The Hummingbird Project,” a thriller currently in movie theaters, dramatizes a quest to connect a fictional stock exchange in Kansas to computers in New Jersey via a fiber-optic cable — laid completely straight — to achieve a millisecond advantage in trading.
Though the film opened to mixed reviews, real-life traders reportedly are flocking to see it. “It’s a movie about us, finally,” the founder of a hedge fund that focuses on high-frequency trading, told The Wall Street Journal. “We have the spotlight. That’s exciting.”
As someone who has been building the underpinnings of U.S equities markets for the past 13 years, count me in for the movie. But I don’t expect to see anything in the story that resembles my work here at the LTSE.
The similarity between the proposed Long-Term Stock Exchange and the roughly 15 other stock exchanges that are expected to host trading between now and the end of next year ends with the word “exchange.”
To be sure, and, provided the Securities and Exchange Commission approves, LTSE will be a marketplace for buying and selling shares of listed companies. It will include many of the same participants and be subject to the same regulations that govern U.S. stock exchanges generally. And like other exchanges, LTSE will operate electronically and field orders to buy and sell securities that run over ultra-high-speed lines.
But unlike those exchanges, ultimately our intention is that when companies list shares on LTSE for sale to the public, they will adopt a set of governing practices that are designed to help them build lasting businesses and empower long term-focused shareholders.
For example, we expect that companies listed on LTSE will, among other things, develop indicators of progress toward long-term success and link executive pay to long-term performance. And that they will disclose investments in long term-focused research and development, and explain their approaches to community, diversity, and the environment.
Unlike most U.S. stock exchanges, which look to trading and the data it generates as main sources of revenue, we expect to earn the bulk of our revenue from providing companies with software and services that are designed to enable issuers to thrive over the long term.
Examples include a service for differentiating, as Warren Buffett put it recently, “shareholders who are staying” from “those who are leaving.” We also create software tools designed to help the next generation of companies — the public companies of tomorrow — capitalize, hire, compensate, and grow.
In short, a stock exchange is one part of how LTSE aims to uphold our mission to enable the next generation of bold, visionary companies to thrive. It will enable us to serve companies that, with the support of similarly aligned shareholders, look to build their businesses over years and decades.
We hope that LTSE will encourage companies to list with the peace of mind that going public will enable them to advance their vision over time. If we succeed, LTSE will have helped to reverse a trend in which the preoccupation with the short term that plagues many public markets has spurred some founders to put off going public or to avoid doing so altogether.
The trend takes a toll on everyone because it forces long term-focused investors such as pension funds and endowments — the people who invest for our retirements — to search out returns in private markets that carry costs and reduce transparency.
Though, like all institutions, U.S. stock exchanges can improve, on the whole, they do their jobs well, trading upward of 7 billion shares each day on behalf of the companies, traders, asset managers, and other participants whom they serve.
The stock exchanges have their businesses and we have ours, which is to enable a new way of being public and to create an ecosystem that supports it.
