A new stock exchange for long-term thinking

A startup backed by prominent Silicon Valley names is moving toward creating a new US stock exchange, one with additional rules for companies and investors designed to reward long-term shareholding and business strategies to generate long-term results.

Eric Ries, a San Francisco entrepreneur and author of The Lean Startup, said his team working on the Long-Term Stock Exchange (LTSE) intends to apply to the US Securities and Exchange Commission (SEC) for approval to operate a new exchange, though declined to specify the timing. The for-profit company behind the LTSE has raised money from investors including venture capitalist Marc Andreessen, tech publisher Tim O’Reilly, and Aneesh Chopra, who served as the United States’ first chief technology officer. Former New York Stock Exchange CFO Amy Butte is an advisor to the project, and its staff includes veterans of the NYSE and US Treasury Department.

US tech startups have long wanted to overhaul the process for firms to list their shares and to find ways to minimize pressures on public companies from high-frequency trading, cynical activism, and any distorting incentives of quarterly results. [Quartz]

As with the Liberal Democrat policy of introducing regional stock exchanges, what interests me about this move is the principle of tapping the power of market forces but changing the market within which they operate.

Markets are not some timeless Platonic construction, but dependent on custom, social norms and regulation. Change those and what market forces deliver also changes. As environmental action shows, using market forces in this way is often the most effective route.