Regulators should consider allowing smaller companies to pay broker-dealers to make markets in their shares as a way to spur trading and encourage initial offerings, NYSE Euronext and Nasdaq OMX Group Inc. executives said Tuesday.
Such a change in regulations would increase the ability of investors to buy and sell stock by boosting market makers' economic incentives, Joseph Mecane, co-head of U.S. listings and cash execution at NYSE Euronext, said at a subcommittee meeting of the House Committee on Oversight and Government Reform. The Financial Industry Regulatory Authority, which oversees almost 4,500 brokers, banned the practice in 1997, he said.
U.S. policy makers, regulators and exchanges are seeking ways to improve trading in smaller companies in order to encourage more of them to go public. Rules adopted in the last decade have driven up costs for companies that want to sell shares and shifted trading incentives toward higher capitalization stocks, according to a report last month by the IPO Task Force, a group of private securities professionals.
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