From the start, New York City has had the enviable advantage of being the fulcrum of America’s financial services industry. The New York Stock Exchange, which dates back to 1792, facilitated the city’s emergence as the center of U.S. commerce, a status that it has long taken for granted. But it may not be able to do so much longer. New York has been losing its dominance in finance for years, and the new Texas Stock Exchange (TXSE) is another sign that it may not be able to bank on that status in the future.

Industry hubs are valuable both for the cities they’re located in and for the broader national economy. Historically, the big money industries grew and advanced by being mostly located in a single place. Clustering enables the collaboration, networking, mentoring, and serendipity that make commerce and innovation possible.

New York’s finance industry may get less cultural cred than other industries like art and media, but its long history is what made Gotham’s growth into one of the world’s greatest cities possible. In the early days of trading, people had to finalize transactions in the same physical location, and Wall Street remains the home of the biggest and oldest American stock exchanges. Being the center of finance meant that New York attracted an intelligent, civic-minded population and, critically, a huge tax base.   

But in the past few years, the link between New York and finance has weakened. As trading, and then almost every other aspect of the business, has moved online, physical presence has progressively lost its salience. And given New York’s higher taxes, rising crime, and declining quality of life, it’s no wonder that many jobs, in finance and other industries, have moved south—especially to Texas. This was true even pre-Covid: in 2015, Texas boasted more finance workers than New York. The trend has only accelerated since the pandemic. Based on number of workers, New York is no longer the center of the financial industry and hasn’t been for a while.

Bureau of Labor Statistics

New York at least remains the center for trading stocks, but even that can change, as witnessed by Texas governor Greg Abbott’s recent announcement that a new stock exchange will be built in downtown Dallas. The TXSE is promising to cut red tape and regulations in the hope that this will attract listings with fewer hurdles than are demanded by the New York exchanges. True, many regulations are federal, so the companies listed in Texas won’t be able to skirt them. But the New York exchanges impose their own additional rules, which can be unpredictable and costly, or even outright political—such as diversity requirements for corporate boards.

TXSE probably won’t upset the New York exchanges’ dominant positions any time soon; the healthy competition may even encourage the older exchanges to be more efficient and less political. But the creation of TXSE represents another strike against New York’s hold on finance. Technology that enables people to do their jobs anywhere, zero state income taxes, and Texas’s better business climate—all stand as warnings that New York can’t take finance for granted anymore.

Photo by ANGELA WEISS/AFP via Getty Images

Dek: Probably not, but the added competition may prove healthy for America's finance industry.


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