549. Howell E. Jackson, Andreas M. Fleckner & Mark Gurevich, Foreign Trading Screens in the United States, 6/2006; subsequently published in Capital Markets Law Journal, Vol. 1, No. 1, 2006, 54-76.
Abstract: Trading screens allow investors to trade on an exchange without being physically present at
the exchange or even in the same jurisdiction where the exchange is located. Europeans have
repeatedly urged the United States to facilitate the placement of such remote trading screens from
European exchanges in the United States. The U.S. Securities and Exchange Commission (the “SEC” or “Commission”), however, has objected to the placement of any such terminals in the
United States unless the foreign marketplace first registers itself as a securities exchange under
U.S. law. The controversy over remote trading screens is emblematic of a range of controversies
between U.S. and E.U. regulators. Europeans see the SEC’s position as an unvarnished act of economic protectionism, designed to preserve the position of the New York Stock Exchange and other U.S. trading markets. The SEC views its requirements as essential to safeguard U.S. investors from trading on inadequately regulated markets and from purchasing the securities of foreign issuers that do not comply with U.S. disclosure requirements.
This article argues that technological advances in the securities industry have to some degree mooted the controversy. Notwithstanding the SEC’s efforts to insulate U.S. retail investors from overseas markets, there are other ways for U.S. residents to reach these venues. In light of these alternative trading channels, the principal effect of the SEC’s rules on foreign trading screens for U.S. investors is to raise the cost of foreign investments and inhibit certain trading strategies. On the other hand, the SEC does not hinder cross-border competition among securities exchanges to the extent that many critics of the Commission have suggested.
While the issue of foreign trading screens has for many years been a peripheral issue in the
E.U.- U.S. financial services dialog, the looming mergers of major European and U.S. exchanges
might intensify the discussion about the regulatory treatment of trading markets that transcend
international boundaries. At the same time, as disclosure requirements and accounting requirements
head towards trans-Atlantic convergence in the next few years, regulatory officials may
finally be able to resolve the controversy about the placement of foreign trading screens in the
United States. Once the SEC has satisfied itself that accounting standards of European issuers
are functionally equivalent to those applicable to U.S. firms, the Commission may find it much
easier to liberalize its treatment of remote trading screens, at least those associated with European