In a speech to the France-Canada Chamber of Commerce in Paris, TSX Group CEO Barbara Stymiest today called on Canada and the European Union to explore on “an urgent basis the potential for significant benefits to investors and listed companies through mutual recognition of each other’s stock markets.”

This form of integration, rather than requiring companies to list in every market where they raise capital, could reduce investor costs for cross border trading by more than half, she argued.

Stymiest refers to a new report by Dr. Benn Steil of the U.S. Council on Foreign Relations, which contends that U.S. Sarbanes-Oxley Act, passed last year, is an expansion of American protectionism, increasing the cost for US investors of buying and selling shares of companies listed overseas. Mutual recognition of stock exchanges, the report estimates, would produce a 60% decline in trading costs in Europe and the U.S., a 50% increase in trading volumes between Europe and the U.S. and a 9% decline in the cost of capital in these two markets. “Dr. Steil’s proposal is that we stop trying to harmonize rules or standards,” Stymiest said.

A Canada-EU pilot project would generate different results, she said, but nonetheless demonstrate the workability of the idea of mutual recognition of stock exchanges on a larger scale. She noted that at a Canada-EU summit in Ottawa last month, Canadian and community leaders agreed, in fact, to instruct their trade ministers to design a “new type of forward-looking, wide-ranging bilateral trade and investment enhancement agreement.”

Another summit is planned for this year. This summit, Stymiest believes, should consider the recommendations of Steil’s report. “Before they meet again, I believe trade ministers – and I would add finance ministers — should examine the potential for Canada and Europe providing a living demonstration of what Steil’s proposal might achieve.”

Stymiest said she believes that Canada might be ideal as a demonstration of the feasibility of mutual recognition proposals because Canada’s “principle oriented” approach to governance is more akin to that in the U.K. and Europe than the rules-oriented approach of the SOX. Canada is less likely to encounter the internal resistance to such an initiative, which may help expedite discussion and interest in a mutual recognition regime, she argued.

Despite our continuing reliance on the North American market, Stymiest said, “we are bound by the wisdom of hedging our bets to the broader worlds that global markets represent.”

But, Stymiest cautioned that “the U.S. may be reluctant to consider such a change and abandon traditional protections which significantly increase costs for foreign companies wanting to raise money in the U.S.” She went on to say that “Canada and Europe may be ideally situated, especially given Canada’s strong economic performance in recent years, to provide a demonstration of the workability” of the advantages inherent in such a proposal.