The globalization of international financial markets is advancing another step with proposals from the US SEC for mutual recognition of some foreign markets that could make it significantly easier for US investors to trade foreign securities directly.
Under the present rule, a US investor wanting to trade a foreign security must go through a US broker and ask that broker to execute the trade on a foreign exchange through a foreign affiliate that is a member of that exchange.
Mutual recognition of regulatory standards could, however, enable foreign exchanges to provide direct access to US investors, through US brokers, and make it easier for foreign brokers to do business with US investors.
The move should substantially reduce the cost to US investors of trading abroad, something that they have been doing more and more of for several years. It is estimated that about two-thirds of US investors now hold foreign securities, compared with one-third five years ago.
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