Tech companies and other start-ups will soon be allowed to raise funds on the New York Stock Exchange without paying hefty subscription fees to Wall Street banks, a move that threatens to upset the way initial public offerings Americans have been carried out for decades.

The Securities and Exchange Commission announced on Tuesday that it had approved a plan from NYSE Group Inc. for something called direct primary listings. This change marks a major shift from traditional IPOs, in which companies rely on investment banks to guide their sales of shares and shares are allocated to institutional investors the day before trading begins. Instead, companies will be able to sell shares directly on the stock exchange to raise capital.

Direct-listed IPOs have been limited to date, as they have primarily been used by companies that wanted to create liquidity events for early investors or management to cash in by selling shares, as opposed to issuance. new stocks that attract billions of dollars in money fees. In September, workplace management software maker Asana Inc. and Palantir Technologies Inc., the data mining company founded by billionaire Peter Thiel, used direct listings to go public.

The SEC’s approval of NYSE’s plan follows months of wrangling, including a decision earlier this year to halt consideration of the proposal at the behest of the Council for Institutional Investors, a group that represents the major pension funds and endowment funds. The group had argued that the plan would erode investor protection and could make it more difficult for shareholders to sue material inaccuracies or omissions made during the IPO process.

The NYSE dismissed these criticisms and disputed that the changes would increase risk to investors – arguments that ultimately prevailed. Enforcing the rule under SEC Chairman Jay Clayton, who was appointed by President Trump, could prove important to the exchange and Silicon Valley. That’s because there’s no guarantee that an SEC chief chosen by President-elect Joe Biden would approve the NYSE proposal.

Now that the SEC allows companies to raise new capital through direct listings, critics and backers alike agree that listings could become much more popular.

“It is a game-changer for our capital markets, leveling the playing field for everyday investors and giving companies another route to go public at a time when they are looking for precisely this kind of innovation,” said NYSE President Stacey Cunningham in a statement.

One of the reasons that start-ups and their venture capital funders might favor direct quotes is that there might be less of a gap between the bid price set by bankers and the pop that The first day of trading often follows. For example, Airbnb Inc. opened at $ 146 a share when it went public this month, valued much higher than its listing price of $ 68. This arguably cost Airbnb and its early backers $ 4 billion. Reap the rewards: professional investors who have been awarded shares.

“This is HUGE and hopefully will end 40 years of poorly priced IPOs thanks to an old stale process,” Bill Gurley, a venture capitalist at Benchmark, wrote on Twitter. “It’s very exciting to see the SEC enable innovation in this way. “

Even if banks do not subscribe to direct quotes, one would still expect them to charge a fee for advising companies that go public. Palantir, for example, paid tens of millions of dollars in consulting fees as part of its offering, according to a regulatory filing.

Under the NYSE plan, when stocks change hands after trading begins, new stocks will take precedence over secondary stocks. This will give businesses a better chance of achieving their fundraising goals. Venture capitalists have long advocated for greater use of direct quotes, in part because the deals do not require investors to wait until lock-in periods expire before they can sell their shares.

Some business advisers are skeptical that the change will deter companies from pursuing traditional IPOs. Lise Buyer, managing partner of Class V Group, said there are better ways than a direct listing to minimize big gains on day one of trading, if that is a company’s intention.

“It’s a build that doesn’t solve any problems for anyone,” said Buyer, whose company helps startups prepare for public listings.