The Securities Exchange Commission (SEC) has allowed companies to raise money on the New York Stock Exchange (NYSE) through direct listing, providing an alternative to the traditional Initial Public Offering (IPO) method.

The development will reduce costs for startups as they will no longer be required to let investment banks buy and sell when they first go public on the NYSE. The companies will now be able to sell shares directly on the exchange to raise capital saving up the underwriting fees typically paid to Wall Street banks.

“NYSE’s proposal would provide an alternative means for companies listed on their exchange to raise equity capital in our public markets. I support the approval of the exchange’s proposed rule change,” said SEC Commissioner Elad L. Roisman in a statement.

“However, we must keep in mind that these are still registered offerings, the anti-manipulation provisions of the federal securities laws will still apply, and there will be a variety of participants involved in the initial offering who will all be performing important gatekeeper functions, including an issuer’s financial adviser, which in the direct listings to date have been the same investment banking firms that are also involved in traditional initial public offerings (“IPOs”),” he added.

The New York Stock Exchange (NYSE), which rallied the development called the change as a ‘game changer’ for the markets.

“This is a game changer for our capital markets, leveling the playing field for everyday investors and providing companies with another path to go public,” NYSE President Stacey Cunningham said in a statement.

The Wall Street Journal reported that the companies opting to go for direct listing instead of traditional IPO could also benefit more from a first-day pop in its share price, as in an IPO, the main beneficiaries of such a pop are the professional investors, which purchase shares from the company before they start trading publicly.

Meaning that the companies could raise more money if there is strong public demand for their stock, however, the risk factor also rises if demand falters.