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Interesting Article: US to remove cross-border restrictions on direct trading access

LONDON -- The SEC is moving closer to freeing up rules concerning trading access to foreign stock exchanges, according to reports in the Financial Times. The reforms, which are still unconfirmed by the SEC, may also result in the removal of restrictions on the ability of foreign brokers to solicit US investors.

The possible reforms are said to be a response to the increasing demand from US investors for foreign securities and increasing levels of harmonization among European and US exchanges.

The changes are expected to remove a long-standing barrier to cross-border trading that prevents foreign exchanges from setting up trading facilities in the US without registering with the SEC. Historically, non-US exchanges have been reluctant to register due to concerns about being subject to dual regulation.

'It's difficult to quantify the likely effects of the changes,' comments Catherine Mattison, spokesperson for the London Stock Exchange (LSE). 'Obviously, US investors can find other ways to buy foreign stocks but what isn't allowed currently is direct membership of our exchange.'

At present there is a cost associated with finding a way around these rules, which affects cost-sensitive strategies like algorithmic trading platforms.

The changes are also expected to result in lower costs for brokers and reduced commission fees for investors. 'The cost at the moment is perhaps more of a barrier for smaller and medium-sized US brokers, so those are potentially the two main beneficiaries,' Mattison adds.

While those at the London bourse are unable to comment on the eligibility of other stock exchanges, they say the existence of common European trading rules suggests the proposed changes would probably apply to exchanges besides the LSE.

By Clare Harrison

http://www.thecrossbordergroup.com/pages/165/IR+magazine.stm?article_id=12277