US/EU agree ‘ground rules’ on mergers

Regulators in the US and Europe have established “important ground rules” to ensure that no market is harmed by "undue extra-territorial reach” by regulators on either side of the Atlantic, Securities and Exchange Commission chairman Christopher Cox said on Monday.

His comments come as the City of London continues to worry about the prospect of “regulatory creep” from the US.

The issue has emerged as a test of regulators’ ability to co-operate as cross-border exchange mergers pose a challenge to the way securities and derivatives markets are regulated globally.

It has been thrust to the top of the SEC’s agenda by the proposed merger of the New York Stock Exchange and Euronext, Europe’s second largest stock market that owns the Liffe derivatives exchange.

Mr Cox is due in Lisbon on Tuesday for his first face-to-face meeting with Carlos Tavares, current chair of the rotating leadership of the European college of regulators, which oversees Euronext.

Mr Cox said: “I’m very comfortable that we’ve already established some important ground rules. First, national regulation is going to remain the norm. We are going to work together to ensure that the sovereign interests of each [national] regulator are respected and maintained.

“We are going to limit the potential disruption that would be caused by undue extra-territorial reach, while at the same time working to continue our close collaboration in terms of information sharing and the enforcement area,” he said.

Asked whose extra-territorial reach he was referring to, he said: “First, the United States; second, every other country. The obverse of a system that respects sovereign regulatory priorities within the territorial boundaries of each country is that no country that’s collaborating in this way should over-reach. The US will not, and I have every reason to think that every country that we’re working with will also view it the same way.”

Last week, the exchanges said Euronext would have a Dutch foundation for its markets to prevent US authorities from affecting rules and requirements for listing stock in European countries.

The NYSE Group would create a three-person Delaware trust to ensure that no laws were passed in Europe that would affect how US companies were regulated.

Mr Cox said of the two exchanges’ plans: “Everything that I’ve seen so far suggests that the regulatory aims as well as the business and market aims are achievable.”

Mr Cox was speaking as he unveiled a $54m SEC investment in a new “interactive data” system known as XBRL that he said would be “a quantum leap over existing disclosure technologies”.

It will replace the current Edgar system of data retrieval with a system that automatically “tags” company information to allow fast downloading and comparative analysis by Wall Street analysts and investors.

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