August 16, 2018 / 10:07 PM / a year ago

IEX drops proposal for startup LTSE to run listings on its exchange

NEW YORK (Reuters) - Stock exchange operator IEX Group has withdrawn a stalled proposal with U.S. regulators for a new corporate listings program in partnership with a Silicon Valley-based startup aimed at promoting long-term growth ahead of short-term profits.

IEX, which in March asked the U.S. Securities and Exchange Commission to let the Long-Term Stock Exchange (LTSE) run an independent listings program on IEX’s Investors’ Exchange, withdrew the proposal in a letter to the SEC dated Aug. 15.

SEC staff initially approved the LTSE plan on June 29. But in a setback to both IEX and LTSE, the regulator stayed the approval indefinitely on the same day, pending further review.

“After consulting with LTSE and other stakeholders, IEX decided to withdraw the filing, and we are now discussing next steps,” IEX spokeswoman Sara Forster said in an email on Thursday. “IEX continues to support LTSE’s mission.”

IEX, or the Investors Exchange, still intends to list companies under its own program, which was approved by the SEC in October.

The LTSE plan was announced in December and would have bound participating companies to strict standards of corporate governance around things like executive compensation, disclosure, shareholder voting and board and stakeholder policies.

For example, more director compensation would be stock-based and tied to long periods, and shareholders who hold stock for longer periods of time would accrue more voting rights.

LTSE was started by Eric Ries, who wrote the book “The Lean Startup,” and has advised hundreds of companies on growth plans.

LTSE has made progress on building its own stock exchange, but the timeline for a launch is uncertain due to regulatory and other factors, Ries said in a telephone interview.

“It’s always been our plan to build an exchange and nothing has changed from that goal,” he said.

IEX, which went live as a stock exchange in 2016, has yet to poach any companies for its listing program from Nasdaq Inc (NDAQ.O) or Intercontinental Exchange Inc’s (ICE.N) New York Stock Exchange, which hold a near duopoly on listings.

Casino magnate Steve Wynn, an early investor in IEX, had said he would consider moving Wynn Resorts Ltd’s (WYNN.O) stock to the Investors Exchange. But Wynn has since resigned from Wynn Resorts amid allegations of sexual misconduct.

Company shares can trade on any of the 13 U.S. exchanges, regardless of where they are listed, but listings fees and corporate services offer a steady stream of revenue to host exchanges.

Reporting by John McCrank; Editing by Tom Brown

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