Mutual recognition and the transatlantic dialogue: The concept and its progress.

The increased demand and opportunity for cross-border trading activity has provided the opportunity to re-evaluate the appropriate regulatory approach to cross-border access. The regulation of cross-border products and services by securities firms has not kept pace with the growing globalisation and interwoveness of the securities markets. This has put pressure on regulators worldwide to come up with crossborder regulatory initiatives. From a regulatory perspective, various approaches of how to manage the regulatory tension have been proposed to accommodate the growing importance of rapidly growing markets and burgeoning cross-border trade and the decreasing importance of national borders in capital markets, while most regulatory infrastructures remain nationally based. A model that has gained increased interest is Mutual Recognition of securities regulation as a solution for effective regulation in the world of cross-border securities trade. The Mutual Recognition concept of the USA's Securities Exchange Committee (SEC), of which the discussion started in early 2007, is now gaining increased acceptance by the international community. With US investor demand for foreign securities exponentially increasing over the past few decades, the SEC is considerably expanding US investors' access to foreign markets and foreign securities intermediaries by developing a structure to mutually recognise foreign brokers-dealers and foreign exchanges. In March 2008, the SEC announced its plans to enter into formal Mutual Recognition discussions to explore initial agreements with a number of reliable foreign regulators in countries such as Australia, Canada and the EU. In their Joint Statement of 1st February, 2008, the SEC and the European Commission announced their will towards an integrated EUUS securities market by endorsing the Mutual Recognition of securities market law as the central approach. A transatlantic Mutual Recognition regime (framework) has the potential to realise the benefits associated with greater access of EU and US investors to broader and cheaper transatlantic market and international market intermediaries. Mutual Recognition could also simplify investors' ability on both sides of the Atlantic to greater diversify their market securities portfolio by broadening their investment choices and increasing their access to more information about foreign investment opportunities. In this paper the Mutual Recognition concept will be explained in more detail, including the mechanism, the framework, comparability process and the preconditions. Special focus is on the role of the Mutual Recognition approach as a way to create a transatlantic financial market. To what other topics, next to trading venues and intermediaries, can the scope of Mutual Recognition in the US-EU dialogue be enlarged? What does this concept mean for future regulatory cooperation and coordination? [ABSTRACT FROM AUTHOR]