The SEC authorized the Long-Term Stock Exchange, Inc. ("LTSE"), a Silicon Valley-based venture, to operate as a U.S. national securities exchange.

In a statement, LTSE said that the SEC decision "authorizes the company to operate a fully automated electronic platform for the buying and selling of shares." LTSE, which will be the 14th U.S. Stock Exchange, said it will be the "only U.S. stock exchange designed . . . to help companies create lasting businesses and empower long-term-focused investors."

The Council of Institutional Investors ("CII") submitted a comment letter to the SEC stating that it did not support the LTSE's application to become a national securities exchange. According to CII, the LTSE's application conflicts with CII's membership-approved policies by proposing "Corporate Governance Requirements," which would allow it to have multi-class share structures with unequal voting rights. Additionally, CII stated that its application does not include any information on its reported plans to include time-phased voting rights into its proposed corporate governance listing standards.

LTSE's application to become an exchange did not provide any information as to what its listing requirements will be. The SEC declined to take up CII's objections.

Commentary / Steven Lofchie

According to prior news reports, the LTSE will establish listing requirements that are significantly different from those on other exchanges. In particular, it was reported that the exchange's listing requirements would permit the listing of issuers whose corporate organizational documents gave greater voting rights to corporate founders and other investors that had held their shares for a longer period, rather than to later investors. The CII had objected that there would be no time limit as to these super voting rights. It remains to be seen what the LTSE will actually seek to do as to permitting issuers to grant founders' super voting rights for an indefinite period.

Leaving aside the issue of voting rights and whether the LTSE can be successful as an alternative listing market, a more interesting question is whether the LTSE can outcompete other exchanges and market participants in its use of, and sale of, data. To a greater and greater extent, exchanges make their money by commercializing data, rather than just by facilitating executions. While the founders of the LTSE may not have as much experience as the heads of the existing exchanges in facilitating execution, they likely have a great deal more experience in the commercialization of data.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.