19
almost every financial asset.
44
As every recent study attests, the one hope of challenging
the US in financial markets – a single European financial market – still remains very
much a far-off goal.
45
Market size, then, does not translate directly into market power. Instead, relative
market power depends primarily on the degree to which foreign firms participate in and
rely on a regulator’s jurisdiction.
46
The power of US regulators stems from the large
numbers of foreign firms who depend on its financial markets and must comply with their
rules. Many major European banks and insurance companies have competed in the US
for decades, and judging by the net purchases of US equities by EU investors ($83,271
million in 2001),
47
European securities firms also rely on American markets. European
and other foreign regulators bend to SEC preferences because they want their firms to be
able to continue benefiting from American markets and fear the US regulator’s ability to
prevent it. As the number of European firms benefiting from American markets has
hardly diminished, a focus on the US is not likely to yield an explanation for the changed
relationship.
For answers, we have to challenge statist assumptions and turn to developments at
the European-level. Since the introduction of the euro, policymakers have primarily
concerned themselves with finishing the job – understanding the obstacles to a single
financial market and the best way to remove them in order to reap the full benefits of a
single currency. These concerns led directly to two intertwined EU developments. The
Financial Services Action Plan provides the content – the legislation deemed necessary to
44
Some of the more common measures of market size are industry revenues, number of firms,
capitalization, volumes of transactions and internationalization of flows.
45
For a recent example, see Commission 2004a; b.
46
See Aggarwal for a discussion of monopsonistic power (Aggarwal 1985).
47
Source: US Treasury Department as printed in SIA (2002).
Convention