Latin American Capital Markets

GLOBALIZATION.TECHNOLOGX AND REGULATION IN CAPITAL MARKETS 55The U.S. SECs Concept Release had set out to address the issues of foreignmarketaccess in addition to the ATSs. 6 However, the issues related to ATSs were importantand complicated enough that the discussion of foreign markets was deferredfor another time.The U.S. SEC proposed three nonexclusive approaches:1. Mutual recognition approach. This approach would mean reliance on a foreignmarket's primary regulatorThis would work only for those countrieswhose rules and regulations are similar Most emerging markets would notbe included in this approach. There would be a great deal of politics involvedin determining countries whose regulations are comparable. Thedeveloped markets would select countries whose regulation is comparableto that of their markets. In the United States, the concern is that foreignmarkets could operate with fewer regulatory burdens than U.S. markets.Thiswould be anticompetitive for U.S. exchanges that would, in turn,want their regulatory burden reduced. It would even be possible for U.S.exchanges to register in the foreign country under less regulation and stilloperate in the United States. Europe has adopted this approach.2. Exchange registration approach. The domestic regulator applies the samerules and regulations to foreign and domestic exchanges operating in thecountry. As globalization proceeds, exchanges could face several sets ofregulations, making this a costly approach.3. Access provider regulation. The United States considered the possibility ofregulating access providers, such as exchanges and broker-dealers thatprovide investors with access to foreign markets.On the Internet, the U.S. SEC's view has been that foreign exchanges andbroker-dealers should post a prominent disclaimer and refuse to transact with U.S. investors.The foreign market should also not allow access to U.S. investors indirectlythrough its own members. In March 1999, the U.S. SEC issued an exemption toLondon-basedTradepoint Stock Exchange to provide access to securities listed on theLondon Stock Exchange. This exemption was granted based on Tradepoint being alimited-volume exchange in the United Kingdom. The primary market of a countrycould not be considered a limited-volume exchange. Even in this case, only qualifiedinstitutional investors have access to all securities; other public investors only have accessto securities registered under the U.S. Securities Act in the form of American De-Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub6 For details, see U.S. SEC Release No. 34-38672; International Series Release No. IS-1085; File No. S7-16-97.