BOSTON (AFX) - The head of the Nasdaq Stock Market Inc. said Tuesday that recent competitive moves by his exchange and the rival NYSE to invest overseas won't yield truly global exchanges anytime soon, despite potential advantages for investors and publicly traded companies.
National and regional pride will help local exchanges survive the forces of globalization, and regulatory systems unique to individual countries' stock exchanges will persist for the foreseeable future, said Robert Greifeld, president and chief executive of the Nasdaq.
'The fact that globalization will have a nationalistic play to it will certainly make this a marathon, not a sprint,' Greifeld said in a speech to the Boston College Chief Executives' Club.
Greifeld said retail investors could enjoy lower transaction costs from trading stocks on efficient electronic markets with big trading volumes, and global companies could broaden their investor bases.
'They really should have an investor base that in a very real sense nears their global footprint,' Greifeld said.
However, he said, 'You still run into regulatory issues that will slow progress.'
'In my time, I don't expect it will change in a meaningful way. Probably in our children's time, we will get to a situation where we can look at regulation on a more global basis,' he said.
The Nasdaq, the largest U.S. electronic stock market with 3,200 listed companies, has recently competed with the New York Stock Exchange to expand overseas in the first wave of consolidation in global stock markets. Nasdaq amassed a 25 percent ownership stake in the London Stock Exchange, Europe's biggest market, after the London Stock Exchange rejected Nasdaq's initial $4.2 billion takeover offer in March.
And the NYSE's parent, NYSE Group Inc., has agreed to acquire Paris-based Euronext NV for about $10 billion, although the deal to acquire Europe's second-largest securities market still needs approval from shareholders and regulators.
The Financial Times, quoting unidentified sources, said Monday that Nasdaq was in 'preliminary talks' to acquire Nordic and Baltic stock exchange operation OMX AB. Greifeld declined to comment on OMX to reporters after delivering his speech Tuesday, and he told Nasdaq's annual meeting Friday that his market won't rush into overseas deals.
On Tuesday, Greifeld said Nasdaq's efforts to encourage foreign companies to list their stocks on Nasdaq rather than overseas exchanges have been hampered by the Sarbanes-Oxley Act, which arose in response to several U.S. corporate scandals in 2002.
The act's strict anti-fraud provisions and disclosure requirements have enabled other countries to market themselves and their stock exchanges as places where business and trading can be conducted with less regulation.
'One of the unintended consequences of Sarbanes-Oxley is that we see a global race to the bottom with respect to regulatory standards,' Greifeld said. 'You have exchanges on the planet saying, 'I have less regulation than the U.S.,' and then the next exchange saying, 'I have less regulation than them.''
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