SEC under pressure to ease foreign trading rules

The US Securities and Exchange Commission is considering easing access to foreign securities and markets, possibly first allowing institutional investors to more easily order trades through foreign brokers, an SEC commissioner said on Friday.
Annette Nazareth, a Democratic commissioner, said the SEC has not yet laid out a specific plan for easing the registration requirements of foreign brokers and exchanges. The agency is first examining ideas that could clear the pathway for US investors to make more direct trades.
"It is not surprising that we are under increasing pressure to permit foreign participation in our markets under more flexible terms," Nazareth said at an American Bar Association meeting on international issues.
"Our restrictions ... have inhibited to some extent the growth of trading in foreign securities in the US"
Current rules require non-US financial firms that want to regularly provide services to American customers to obtain US broker-dealer affiliates. Non-US exchanges that want to place computer screens for trading in the United States are required to register with the SEC.
Foreign broker-dealers also generally cannot advertise or solicit business in the United States, making it expensive to reach US investors. Nazareth laid out some possible changes, such as granting conditional exemption to full US registration to foreign exchanges with comparable regulatory regimes.
She also said the SEC may consider rules that would initially permit foreign brokers to only have direct access to qualified institutional investors.
"They would be sophisticated enough to bear the risk of broker-dealers not registered in the US," Nazareth said. More disclosure requirements might also be put in place to make it clear to US investors that trades were done in a foreign marketplace and were not subject to US laws.
Speaking to reporters after the event, Nazareth said there is no specific timeline for the SEC to ease restrictions on foreign trading. The commission would likely begin the process by holding an open forum to discuss the issue, she said.
SEC Chairman Christopher Cox, a Republican, has also spoken in favour of ways to ease US investors' access to foreign securities and markets. He recently said the SEC is trying to reduce "regulatory frictions" at a time when American investors are increasingly looking for opportunities outside the United States.