Committee Study Shows Weakness in the Competitiveness of US Primary Markets

U.S. capital market competitiveness showed continued historical weakness through the fourth quarter of 2014, despite the positive effect of the record-breaking initial public offering of the Alibaba Group.

“While the U.S. capital markets have strengthened in terms of domestic IPOs, the overall competitive landscape internationally continues to disappoint,” said Professor Hal S. Scott, Director of the Committee on Capital Markets Regulation. “Even taking into account the Alibaba IPO, foreign companies are choosing to raise capital outside U.S. public markets at rates far below the historical average. Putting aside Alibaba, the competitiveness of our public markets is significantly worse. ” Professor Scott also expressed concern that “there is a disturbing trend of annual declines in the U.S. share of secondary market trading.”

Alibaba’s choice of New York over Hong Kong was driven primarily by a desire for a dual share class structure, which could not be achieved in Hong Kong, rather than a judgment about the appeal of the U.S. regulatory framework and liability rules, i.e. securities class actions. Establishing a lower standard of governance than other financial market centers is not the way to restore the competitiveness of the U.S. capital markets.

Excluding Alibaba,a number of additional key measures of market competitiveness showed continued weakness, including:

  • The U.S. share of global IPOs by foreign companies stood at 8%, a far cry from the 1996-2007 average of 26.8%.  Foreign issuers continued to express an aversion to U.S. public markets, as 85.5% of IPOs by foreign companies were conducted via Rule 144A.
  • The U.S. share of the 20 largest global IPOs by foreign companies stands at 1 out of 20, which is down from the 1996-2007 average of 20%. 
  • U.S. share of global secondary market share-trading sits at 36.0%, continuing the uninterrupted pattern of annual declines from 58.2% in 2008 to 42.6% in 2013.  This calls into question the long-standing assumption that the technical sophistication of U.S. trading markets will ensure their privileged position in global capital markets.

The CCMR believes that the policy recommendations in its 2006 Interim Report remain essential to the restoration of U.S. competitiveness. “In addition, we urge regulators implementing the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act to minimize the adverse competitive effects of new regulations, particularly in areas where the U.S. regulatory approach differs significantly from competitor markets,” said Scott.

Historical data through 2014 are available at

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A PDF of this release, along with the data chart, may be downloaded here.