Hence the best approaches are those that enable firms to come up with a consistent global approach with respect to their procedures, even it regulators may have somewhat different rules which lie behind these procedures. If firms are able to act in a consistently global way, then the regulators can claim success with respect to their collective engagement. When financial institutions are global, they have strong incentives to use international transactions and capital movements to circumvent regulation and disguise weakness.
There is a need for strong regulatory bodies that are commensurably global in scope and can maintain oversight of the full spectrum of firm operations. E. g. the creation of euro currency union moves national regulation of EU wide and int. banks very difficult. A great deal strengthening of banking regulation of the EU level is needed if a cascade of future scandals is to be avoided. Pendulum shaping the regulatory process has in recent year’s survey towards unnecessary costly, burdensome and intrusive rules and procedures.
Other financial centers have gained a competitive advantage over US market by adopting less intrusive regulatory regimes. A regulatory “race to the bottom” will serve no useful long term purpose. What is needed is the proper balance between investor’s protection and the creation of market integrity. On the one hand and intrusion that regulation inevitably imposes on firms and individuals that participate in the financial markets on the other. And it is important to realize that it is investors who ultimately bear most of the cost of unnecessary regulations.
Firm participating in the markets suffers modest profit and passes most of this cost on to investors. More stress is required on the following area:- 1. Adoption of systematic cost benefits analysis in the design of its rules. 2. The use of more principle based rules and distinction between retail and wholesale investors and transaction in it is writing. 3. The adoption in its supervisory regime foe securities firms or a more prudential “safety and soundness” approach which characterizes bank regulators. 4. Greater cooperation among securities regulators both domestically and internationally.
There is a need for international regulatory cooperation. After so many years of unfulfilled expectation, globalization of equity markets is finally becoming a reality. Corporations and investors both name to gain by being able to list simultaneously on multiple exchanges worldwide, corporate will gain access to go beyond physically disparate pools of liquidity. Investors will reap the fruits of reduced trading cost through international competition, the ability to invest sequentially across the globe and easy access to needed portfolio diversification.
Globalization of equity markets is proving difficult as regulators raise objections:- ? Some No doubt legitimate ? Some perhaps no more than economic protectionism masquerading as regulatory concerns. Distinctions based on geographic trading venues are at best and adequate stop-gap measures but face challenges overtime. The full benefits of global exchanges merger will occur when trading platforms are fully integrated based on computer technology. When this integration will happen, Trades will not take place in New York or London or Paris they will rather take place on a satellite over Atlantic Ocean.
What home country regulators will be responsible for and what home country laws will apply to, those trades? Effectively governing these trades on globally merged exchanges will ultimately require cooperation among international regulators to produce harmonized trading rules. Here, the president’s working group can produce energy and focus for this task, will require leadership and hard work. The committee urges the working group to make the task of international coordination and rule harmonization a majority at priority.