Staff at the US Securities and Exchange Commission (SEC) are preparing a proposal to allow US brokers to access foreign stock exchanges directly, making it easier for US investors to trade internationally. This kind of access would be granted to exchanges in countries that the SEC deems to have comparable regulations to those in the US
in other words, jurisdictions with highly developed securities laws, including the UK, France, Germany, Australia and Japan.
Under existing rules, non-US exchanges would have to register with the SEC to grant US brokers direct access, but exchanges have shunned this, fearing dual regulation by the SEC and their home regulators. The proposal would allow for so-called mutual recognition of other countries' securities laws, eliminating the need for foreign exchanges to register with the SEC.
The SEC first explored the mutual recognition concept in-depth in a roundtable discussion on 12 June 2007. The roundtable panel included representatives from various national and regional US exchanges, investment banks and former SEC commissioners. The discussion has been given added impetus recently by the completion of cross border exchange mergers such as NYSE/Euronext, Nasdaq/OMX and Eurex/ISE.
Some in the market are expecting the mutual recognition proposal to hit commissioners' desks soon. One news report suggested it could be as early as this quarter. But while confirming that the SEC is working on the proposal, John Nester, director of public affairs at the SEC, said that there is so far no timetable for staff to present the proposal to commissioners.
There are indications that it could be some time before the proposal is seen. “The commission wouldn’t do something without a full complement of commissioners,” says one source, pointing out that there is one vacancy at the commission, and a further commissioner is set to leave. You could be looking at two to three months before there is a full complement of commissioners. It is difficult to see how anything could proceed in those circumstances.