Texas Stock Exchange Puts a Price on ETF Liquidity
STEELGATE · MARKETS
A tiered listing model ties fees of up to $100,000 to market-maker incentives, testing whether issuers will pay more for stronger trading support in an increasingly crowded market.
October 2, 2026
The Texas Stock Exchange is making an unusual pitch to fund issuers: a more expensive exchange listing could be worth the money if it helps investors trade more efficiently.
The Dallas-based exchange has introduced three annual listing tiers for exchange-traded products, pairing higher fees with more demanding liquidity standards and larger payments to lead market makers. Its September 14 filing, published in the Federal Register on October 1, sets out a model that makes the cost of trading support more explicit. [1]
The commercial question is whether that support can deliver enough value to justify the bill.
For an issuer, a listing fee is a visible expense. For an investor, the cost of a thin market can appear less visibly, through the gap between buying and selling prices or the difficulty of completing a larger order.
TXSE’s approach brings those two costs into the same conversation. It also gives a new exchange a proposition to test against established competitors: charge for a defined level of market-making support, then demonstrate that the resulting market is better.
A booming market with uneven trading needs
The latest industry figures show why the competition matters. The Investment Company Institute reported 5,274 U.S. ETFs in August 2026, compared with 4,117 a year earlier.
That is a net increase of 1,157 funds, or approximately 28.1%, calculated from ICI’s totals—not a count of gross launches. Assets reached approximately $16.27 trillion, up 34.1% over the same period. [2]
ICI also recorded approximately $1.35 trillion in net ETF share issuance through August. That measure tracks creations less redemptions; it is distinct from the value of ETF shares changing hands on exchanges. [2]
J.P. Morgan Asset Management’s review of 2025 reported more than 1,000 U.S. ETF launches, with 83% actively managed, and $58.4 trillion in ETF trading volume. Those figures describe a market expanding in both activity and product variety. [3]
They do not, by themselves, establish that liquidity is deteriorating across the industry. A large aggregate trading total can coexist with individual products that attract relatively few orders.
That distinction is central to assessing TXSE’s filing. The exchange argues that product proliferation has strained market-maker capacity and that existing incentives are inadequate for some funds. It is a diagnosis from a company seeking listings business, rather than independent proof of a market-wide liquidity crisis. [1]
Why a listing does not guarantee an easy trade
An exchange listing makes a security available for trading. The quality of that trading depends on the prices and quantities participants are willing to offer.
The SEC’s investor guidance explains that ETF investors trade at market prices, which can differ from a fund’s net asset value. The bid-ask spread—the difference between the best buying and selling prices—is an additional trading cost.
Authorized participants perform a separate function, creating and redeeming large blocks of ETF shares; arbitrage helps align share prices with portfolio value. [5]
These roles can overlap within financial firms, but they are not interchangeable. A lead market maker’s quoting commitments address the secondary market. They do not replace the fund’s creation and redemption arrangements. [5][7]
Consider a hypothetical fund quoted at $49.90 to buy and $50.10 to sell. Its midpoint is $50, and its 20-cent spread represents 0.40%, or 40 basis points. Buying 200 shares at the asking price and immediately selling them at the bid would cost $40, before commissions or any market movement.
The example illustrates why a low management fee does not tell the whole cost story. It does not establish how any TXSE-listed product will trade.
Nor can an incentive payment eliminate uncertainty about a portfolio’s value or the cost of hedging it. The exchange can influence the economics of supplying quotes; the assets inside the product still matter.
Three prices for three levels of support
TXSE’s schedule gives issuers an annual choice among three tiers, with corresponding market-quality requirements and daily LMM stipends. [1]
Listing tier | Annual listing fee | Maximum daily LMM stipend |
Signature | $100,000 | $278 |
Premier | $55,000 | $139 |
Core | $10,000 | $16 |
Higher tiers generally carry stricter standards. The measurements cover spreads, displayed size, depth at multiple prices, participation at the national best bid and offer, and opening and closing auction quality. Requirements vary by product category. [1]
For readers outside the trading industry, the objective is straightforward: encourage a market maker to offer usable prices, enough shares to trade, and support around the auctions that establish opening and closing prices.
A spread target is a performance benchmark for the assigned market maker, however, rather than a guarantee of every investor’s execution price. Actual outcomes depend on the order’s size, timing, available liquidity and market conditions.
Signature and Premier payments scale with the number of standards met. Core requires all applicable measurements to be satisfied. Signature also provides subsequent-year listing-fee credits tied to missed standards, with restrictions on their use. [1]
The program is therefore best understood as an incentive contract for trading support.
Paying for a higher tier does not establish that a fund is a better investment.
The cost is much larger for a small fund
The economic trade-off becomes clearer when the listing fee is compared with assets.
Moving from Core to Signature adds $90,000 in annual expense. For a hypothetical fund with $10 million in assets, that difference equals 0.90% of assets, or 90 basis points. At $100 million, it equals nine basis points; at $1 billion, 0.9 basis points.
These are illustrative calculations, not predictions of investor expense ratios. They assume constant assets and do not determine whether the sponsor or fund bears the cost.
The implication is nevertheless significant. A small product may have the strongest need for dedicated trading support while finding the higher fee hardest to absorb.
For an issuer, the decision turns on whether stronger support can help attract assets, improve the investor experience or make the product commercially viable. A modest improvement in execution may matter to frequent traders, while an issuer must still account for the full annual expense.
The same arithmetic shows why the payments could attract liquidity providers. Assuming 252 trading days and full qualification every day, the stated daily amounts annualize to $70,056 for Signature, $35,028 for Premier and $4,032 for Core. These are hypothetical totals, not guaranteed payouts or a statement of TXSE’s actual trading calendar. [1]
They also reveal the limits of the proposition. A stipend contributes to the economics of market making; its existence does not demonstrate that every product’s inventory, hedging and capital costs are covered.
Competitors already pay for market quality
TXSE is entering an established field of liquidity incentives.
NYSE Arca’s LMM framework requires continuing quoting obligations and performance standards for primarily listed ETPs. Cboe likewise operates a rewards-based LMM program intended to improve spreads and market depth. [6][7]
Cboe’s current program page states that, effective July 1, 2026, its incentive structure includes volume-based tiers, additional rebates for displayed liquidity and a stipend for qualifying lower-volume products. The latter offers $200 monthly per eligible ETP, subject to assignment and performance conditions. [6]
Those conditions matter. A simple comparison between TXSE’s daily stipend and Cboe’s monthly amount would omit other rebates, eligibility requirements and the different obligations attached to each program.
The more meaningful competitive question is how much useful liquidity an issuer receives for the total cost of listing and supporting its product.
TXSE’s potential distinction is the direct linkage between an issuer-selected fee tier and an associated set of performance incentives. Whether that linkage is commercially superior remains to be demonstrated.
Effective on filing, with regulatory scrutiny still possible
The SEC notice says the fee change has already become effective under the applicable filing process. The commission can temporarily suspend it within 60 days of filing, and comments are due October 22, 2026. Immediate effectiveness should not be read as a finding that the program has delivered its promised market benefits. [1]
Payments for market making also sit within an established regulatory framework. FINRA Rule 5250 generally prohibits members from accepting issuer compensation for quotations or market making, but expressly permits payments provided under qualifying national securities exchange rules. [8]
Regulation M separately restricts certain activities during securities distributions. Rule 102 contains an exception for specified redeemable securities issued by open-end investment companies or unit investment trusts. [9]
For products outside that framework, TXSE presents its reasoning about pricing, arbitrage and prior regulatory relief in the filing. That is the exchange’s legal position; the notice should not be treated as a universal exemption for every non-1940 Act ETP. [1]
The practical distinction is between a transparent exchange-administered program and an issuer privately paying a dealer to support its security. Regulatory permissibility and commercial effectiveness remain separate questions.
The outlook: evidence will matter more than the fee schedule
TXSE announced the completion of its production-trading rollout on July 31, 2026, reporting more than 50 member firms. That establishes an operating platform, but membership alone does not demonstrate the quality of trading in its listed funds. [4]
The near-term test will be whether issuers accept higher fees and whether market makers consistently meet the associated standards.
Early results need careful interpretation. The filing provides automatic performance qualification during September and October as the program rolls out. Subject to subsequent changes, data after that introductory period should offer a more revealing assessment of performance-linked payments. [1]
A useful assessment would track quoted spreads, available depth, execution costs at different order sizes, auction quality, premiums and discounts, and the frequency of missed standards. It should compare similar products and market conditions: a small options-based fund and a heavily traded broad-market ETF do not provide a fair like-for-like test.
The strongest outcome would be evidence that higher-tier products receive better trading support at a cost issuers consider worthwhile. That could encourage competing exchanges to sharpen their own offerings.
A mixed outcome is also plausible. Some products may benefit substantially, while others gain too little to justify the added expense. Issuers could then adjust tiers as they learn what support their funds require.
The harder case would be a program that attracts few higher-tier listings or improves formal quoting scores without materially improving investor executions. In that scenario, the fee schedule would describe a service that the market does not value at its asking price.
TXSE has put a concrete commercial proposition before the ETF industry: dedicated liquidity support has a cost, and issuers should be able to choose how much of it to purchase.
The next stage is proving that the support delivers. For investors, the decisive evidence will appear in the price and ease of an actual trade.
SteelGate note: This article is based on publicly available regulatory filings, industry data and published exchange materials. Exchange claims are attributed; the outlook and illustrative calculations are SteelGate analysis. Nothing in this article constitutes financial, investment or legal advice.
Sources
Federal Register / SEC — TXSE listing fees, performance standards and daily stipends; published October 1, 2026.
Investment Company Institute — Exchange-Traded Fund Data, August 2026; released September 29, 2026.
J.P. Morgan Asset Management — 2025 in Review: An ETF Hat Trick; January 20, 2026.
Texas Stock Exchange — Successful launch of production trading; July 31, 2026.
SEC / Investor.gov — Updated Investor Bulletin: Exchange-Traded Funds (ETFs).
Cboe — Lead Market Maker Program; includes July 1, 2026 incentive changes.
NYSE — Exchange Membership: Lead Market Maker obligations.
FINRA — Rule 5250: Payments for Market Making.
Electronic Code of Federal Regulations — 17 CFR 242.102: Activities by issuers and selling security holders during a distribution.
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