JPMorgan, Goldman Sachs Join Big Backers of New Exchange

(Bloomberg) -- JPMorgan Chase & Co. and Goldman Sachs Group Inc. are signing on to a new equity market that will compete with the New York Stock Exchange and Nasdaq.

The Wall Street banks, along with trading firm Jane Street Capital LLC, are the latest companies to invest in Members Exchange, according to a statement Thursday. They follow nine other financial heavyweights backing the new U.S. stock-trading venue, which plans to launch on July 24, pending approval from the Securities and Exchange Commission.

“To have these sets of investors around the table, giving us guidance and supporting us, is a big statement to the Street, and I think provides us a good chance of success,” MEMX Chief Executive Officer Jonathan Kellner said in an interview. “This fundraise was not about needing the money for the U.S. equity launch -- this was really to get more strategic investors involved.”

MEMX’s original backers -- which include Citadel Securities, Virtu Financial Inc., Bank of America Corp. and Morgan Stanley -- started the company out of frustration with the fees charged by existing equities exchanges. While its investors are often fierce competitors on other fronts, they’ve come together in an effort to put pressure on costs, particularly for market data, and boost transparency.

The new firms will receive board seats and the same voting rights as its original investors, said Kellner, who was CEO of Nomura Holdings Inc.’s Instinet brokerage from 2014 to 2018. He declined to say how much investors have contributed to the venture.

‘Critical Mass’

“We expect this exchange to get critical mass -- we’d like to see it become a vital part of the exchange landscape,” Jason Sippel, JPMorgan’s global head of equities and prime services, said in an interview. Joining MEMX will allow the bank to influence equity-market structure and pricing issues, he said. “Having a seat at the table and some leverage in those discussions has tremendous value.”

MEMX, based in Jersey City, New Jersey, has grown to more than 30 people in the past year, hiring Chief Operating Officer Thomas Fay and Chief Technology Officer Dominick Paniscotti from Nasdaq Inc. It also added Louise Curbishley as chief financial officer and Lindsay Gilliam as chief people officer.

“We view MEMX as another way to express our views in the U.S. equity market structure dialog,” said Amy Hong, global head of market structure strategy for the securities division at Goldman Sachs. “We’re excited to support innovation in equity markets through MEMX.”

Morgan Stanley agreed Thursday to acquire one of MEMX’s original backers, discount brokerage E*Trade Financial Corp., for $13 billion. E*Trade rivals Charles Schwab Corp. and TD Ameritrade Holding Corp., which are merging, are also members of the exchange.

In addition to announcing the new backers, MEMX published a schedule for planned benchmarks in the run-up to its scheduled launch:

• Feb. 6: Testing opens
• March 16: Market data testing
• April/May: Projected SEC approval, member forms signed
• May 11: Platform testing begins
• June 1: Member certification begins
• June 6: First user acceptance testing
• June 20: Second user acceptance testing
• July 24: Exchange launch

To contact the reporter on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Daniel Taub, Steve Dickson

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