SEC and EU start mutual recognition talks on exchange trading

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WASHINGTON, DC – New rules allowing US investors to directly invest in European Union (EU) exchanges and trading platforms have been discussed by Christopher Cox, chairman of the Securities & Exchange Commission (SEC) and Charlie McCreevy, the European Commissioner for the Internal Market and Services.

The SEC revealed a framework for mutual recognition talks would be resolved this year with the European Commission (EC) and the Committee of European Securities Regulators (CESR).

The two regulators discussed recent market turbulence, credit rating agencies, accounting standards, sovereign wealth funds and mutual recognition of securities regulation.

Current rules require EU investors to register with the SEC, and for US investors to trade through an EU exchange member instead of directly through their US broker – mutual recognition would remove these barriers.

An SEC statement last week said: “An EU-US mutual recognition arrangement for securities would have the potential to facilitate access of EU and US investors to broader and deeper transatlantic trading and transaction costs and increase oversight co-ordination among regulators.”

But the breadth of mutual recognition has yet to be seen.

“While the proposals are a positive step, I would be concerned if they were only to apply to traditional stock exchanges and exclude alternative trading systems, as this would give the formal bourses an unfair advantage,” says Rob Falkner, a partner at law firm Morgan Lewis.

“These platforms need to be treated in the same way. This certainly would undo the intention of the Markets in Financial Instruments Directive for creating competition from other exchanges and trading platforms."

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