IIAC joins free trade in securities coalition

Free trade in securities has been a hot topic ever since federal Finance Minister Jim Flaherty announced his intention to pursue the idea in last year’s budget. Now, Canada might be a small step closer to seeing it happen with the Investment Industry Association of Canada’s induction into the Coalition on Financial Regulation.

The organization, which consists of European and American securities industry associations, was set up about a year-and-a-half ago to “raise the profile of the issue of market access and to encourage regulators in the key jurisdictions…for much greater access to these various markets.”

As of now, there hasn’t been much progress with opening financial borders to foreign investors, but that could change if the coalition has its way.

“What the coalition does is supplement and reinforce discussions that are occurring in other venues, for example the ministers of finance at the G7,” says Ian Russell, president and CEO of the IIAC. “We are the practitioners, those in the real world who have a vested interest in ensuring cost-effective delivery of capital to clients. That’s the advantage we bring to the table.”

Besides pushing for free trade in securities, the coalition hopes to discuss ways to co-ordinate rules among the different countries. Russell says that creating greater “convergence and similarity in the rules will make dealing in various markets easier.”

Breaking down barriers to inter-country investing is a high priority for the IIAC, so joining the coalition was a no-brainer. Russell says having access to new markets, and allowing other jurisdictions to use Canadian exchanges, will benefit everyone from investors to businesses.

“This is very positive for investors as it will enable them to enhance their portfolio return, it’s good for markets because it will promote greater liquidity as foreigners come in and find it easier to trade on Canadian stock exchanges, and it will lower cost of capital by giving Canadian companies cheaper access to capital,” he explains.

Joining the coalition is just a first step, though. The member countries are scheduled to meet in London in May to refine the agenda they’ll promote to the rest of the financial industry.

There’s no timeline yet when Canadians might be able to invest in foreign exchanges and vice-versa, but with the financial world becoming an increasingly integrated space, it’s only a matter of time. “We are living in a truly global world,” says Russell. “That was really brought home with problems in the CDO structured market. It started in the U.S. but became a global problem. So, clearly, there’s more need for discussions.”

Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com