The US Treasury Secretary's plan to develop new laws for the financial services industry there may be long overdue. The Securities Act dates back to 1933, and while there have been many additional laws put into place sometimes it's just better to start anew. I don't want to debate the merits of Henry Paulson's plan here. But a perhaps unintended consequence may well be that smaller markets outside of the US, which have been positioning themselves as attractive bourses to list, will be under pressure.

Let's face it. We all love the Sarbanes-Oxley Act. Not because it straightens out shrewd American executives. It might do that, I'm not entirely sure. We love it because it makes the US such a damn difficult place to maintain a listing that even reputable companies are looking elsewhere to go public. According to figures produced by Harvard Law Professor and head of the Committee on Capital Markets Regulation, Hal Scott (quoted in USA Today), the US has been losing its attractiveness big time. In 1996, he says, eight of the 20 largest global initial public offerings were listed on a US exchange. In 2006, it was only one. Up till December 2007, not one of the top 20 global IPOs listed in the US. Similarly, 56 foreign companies abandoned their US listing in the first ten months of 2007, compared to 30 for all of 2006. Among them: Creative Technology and Australia's ANZ Bank.

Bad for them, good for us. Because it inevitably means markets such as the London Alternative Investment Market (AIM), as well as Hong Kong and Singapore, are more attractive listing destinations.

I'm not terribly concerned with the angst US exchanges may have over the prospect of equities and futures markets merging. This is already de rigueur in Asia. Just look at the merger between Singapore Exchange and Singapore International Monetary Exchange (SiMEX) in 2000 (!), and the merger between the Australian Stock Exchange and Sydney Futures Exchange to form the Australian Securities Exchange in December 2006. It's time those mile-driving, gallon-drinking and ounces-weighing Americans get over it and join the 21st century (maybe they'll consider switching to metric in the process).

My greater concern is that the United States already attracts a huge amount of capital, not because they're experts at handling money (for those that think they are, I have two words for you: sub-prime), but because of their sheer size. The statistics from the World Federation of Exchanges (page 33) bear this out. The US financial market has the inertia of a supertanker, even if it's a rusty one.

By contrast, the Singapore Exchange is a tugboat. If the supertanker modernises and becomes more agile, it is my hope that the SGX won't capsize in the wash.

Your thoughts?


Mark Laudi, who thinks it's quaint that the NYSE ditched fractions in favour of decimal calculations less than a decade ago.

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Labels: AIM, Henry Paulson, NYSE, Singapore Exchange