- The Long-Term Stock Exchange (LTSE) began trading on Sept. 9, 2020.
- Companies listing on the LTSE must certify a long term strategic focus.
- Listed companies must adhere to various policies and principles.
- Companies must disclose how they are meeting these requirements.
- Transparent pricing and simplified order types are key trading features.
The Long-Term Stock Exchange (LTSE) commenced operations on Sept. 9, 2020, describing itself as the only national securities exchange in the U.S. that has been designed specifically to promote a long term focus among investors and companies alike. The listing requirements for companies that seek to trade on the LTSE have been crafted with the intent of supporting businesses that seek to "create value over time."
"Modern companies want to innovate consistently, minimize pressure to hit short-term targets, join with long-term investors, and run their businesses with the stewardship that stakeholders and society demand," according to Eric Ries, founder and CEO of LTSE Group Inc. The concept of the LTSE originally was proposed by Ries in his 2011 book, The Lean Startup.
The Long-Term Stock Exchange gained approval from the U.S. Securities and Exchange Commission (SEC) on May 10, 2019, and had expected to commence operations by the end of 2019. At the time, many press reports called it the Silicon Valley Stock Exchange.
To be eligible for listing on the Long-Term Stock Exchange, a company must adhere to five key underlying principles. These are: serving the interests of a broad group of stakeholders, measuring success over long time horizons that stretch from years to decades, implementing compensation plans for executives and directors that reward long term performance, giving directors a crucial role in the setting of strategy and the monitoring of progress, and engaging with long term shareholders.
"Listing with the exchange underscores a company’s commitment to the long term in a way that investors can consider when valuing the company and that employees, customers and communities can take seriously," as the LTSE states in the press release about its launch.
Policies and Principles
Moreover, companies that list on the LTSE must publish and maintain a series of policies that spell out in detail, for the benefit of shareholders and stakeholders alike, exactly how they are complying with the five underlying principles outlined above.
Stakeholders: The company must identify the groups that are vital to its long term success. Also, it should describe its impact on the environment and society, its policies on diversity and inclusion, how it invests in employees, and how it will reward employees and other stakeholders for contributing to its success.
Measuring Success: The company must describe its process for making long term strategic decisions, how it sets priorities, and exactly how it measures long term success. In particular, the company must offer specifics on the time horizon that it considers to be long term, and how this affects strategic decision making.
Executive and Board Compensation: The company must detail how it aligns the compensation of executives and directors with the metrics chosen to evaluate long term success.
Directors and Strategy: The company must explain exactly how the board of directors, or committees of the board, are engaged in the setting of long term strategy, and what responsibilities they have related to the monitoring of progress and metrics.
Long Term Investors: The company must explain how it engages with long term investors.
The principles and policies outlined above were the result of years of extensive research conducted by the LTSE prior to its official launch. A heavily-footnoted white paper from the LTSE explores these topics in detail.
The LTSE participates in the National Market System (NMS), and shares listed on the LTSE also may trade on other U.S. exchanges, alternative trading systems (ATS), and platforms operated by securities dealers. A key feature of trading on the LTSE is its "Very Simple Market," which offers fully displayed price quotes, simplified order types, plus the absence of trading fees or rebates.
Fully displayed price quotes means that all trading on the LTSE "will occur exclusively at prices displayed to all participants." Whether the buyer or seller enters a market order or a limit order, "The price they trade at will always be a price that was fully displayed."
Leading financial backers of the LTSE include Founders Fund, Collaborative Fund, Andreessen Horowitz, Obvious Ventures, Uprising, and Initialized. Among the leading Silicon Valley figures backing the LTSE is venture capitalist Marc Andreessen, through his current firm Andreessen Horowitz. In the 1990s, he achieved fame as the co-developer of Netscape Navigator, which was the dominant web browser in the early days of the public internet.