Report Warns Of Waning Competitiveness In US Public Equity Markets

by Mike Godfrey, Tax-News.com, Washington

06 December 2007

The Committee on Capital Markets Regulation (CCMR) has released a report showing that the competitiveness of America’s public equity markets deteriorated through the first three quarters of this year and is still at a historical low.

“It is particularly distressing that a year after the Committee sounded the alarm on our eroding competitiveness little has been done to address this problem. Our overall position is not improving and in some cases is getting worse,” observed CCMR Director Hal Scott, the Nomura Professor and Director of International Financial Systems at Harvard Law School.

The CCMR is a non-partisan committee of independent US business, financial, investor and corporate governance, legal, accounting and academic leaders. It was formed in the fall of 2006 to study and report on ways to enhance the competitiveness of the US capital markets. Its 32-page report shows that by any meaningful measure, the competitiveness of the US public equity markets has deteriorated significantly in recent years.

This second CCMR report, released on December 4, was issued a year after the Committee’s November 2006 Interim Report, which provoked intense global discussion and controversy.

The Committee gathered data from stock exchanges, the World Federation of Exchanges, financial databases, and market participants to compile 13 separate measures of competitiveness. For each of those measures, the Committee went back to the mid-1990s, or, if later, as far back as a consistent time series would permit.

Fully 12 of those 13 measures show a significant deterioration in US competitiveness over time (and the sole exception remained flat). Since the November 2006 Interim Report – when the Committee first called for urgent action to address the problem – most measures have either continued to decline, or have failed to substantially improve.

Specific findings released Tuesday include:

• Foreign companies delisting shares from US exchanges increased from a dozen a decade ago, to 30 in 2006 and a record 56 already in the first 10 months of this year.
• In 1996, eight of the 20 largest global IPO’s were listed on a US exchange. That plunged to one in 2006, and for the first 10 months of 2007 not one of the top 20 listed in the United States.
• The percentage of US IPO’s listed only on a non-US exchange (by value) increased from a miniscule 0.1% in 1996-2005 to 1.1% in 2006 and 4.3% through Sept., 30 of this year.

“With striking losses in our competitiveness already demonstrated, there simply is no longer any prudent argument for delay,” warned Professor Scott, concluding: “A year ago, the Committee outlined a number of constructive steps to address and restore and enhance our markets’ competitiveness. We know the policy measures that must be taken, but the response has been only about two on a scale of 10 – not nearly enough, or soon enough.”

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