A recent report by the global consultancy firm, McKinsey, la- mented that a number of US firms, big and small, are increasingly preferring overseas bourses—notably London—over domestic exchanges like New York Stock Exchange (NYSE) so as to avoid having to deal with the dreaded Sarbanes Oxley Act, 2002 (also referred to as SOX), which came into existence in the wake of accounting scandals involving high-profile firms like Enron. "Over the first 10 months of 2006, the US exchanges attracted barely one-third of the share of Initial Public Offerings (IPOs) measured by the market value that they captured back in 2001, while European exchanges increased market share by 30% and the Asian exchanges doubled their share", highlighted the report by McKinsey. The draconian SOX laws have proved to be too scary for companies, small and big alike, as they find it hard to comply with a set of rules which are not only complex but also make a big hole in their balance sheet. This has seen Wall Street, the world's financial capital, increasingly losing its prime status to the uprising financial markets of London and Hong Kong.
Indeed, if a section of analysts' worry is to come true, the financial markets of London and Hong Kong are snatching away Wall Street's dominance as the sole destination of IPOs, as well as posing intense rivalry in the field of derivatives. With financial services representing 8% of the US Gross Domestic Product (GDP) and more than 5% of all the US jobs, analysts fear that such a migration of IPO will not only lead to a fall in revenue from other financial services of the economy but may also swipe away more and more high value-added financial services jobs abroad. |
