February 20, 2015 / 8:54 PM / in 3 years

UPDATE 1-SEC mulls promoting creation of U.S. venture exchanges -White

(Adds comments from other SEC commissioners, interview with TMX Group’s CEO)

By Sarah N. Lynch

WASHINGTON, Feb 20 (Reuters) - U.S. regulators are considering taking steps to promote the creation of “venture exchanges” that aim to help smaller companies get listed and actively traded, Securities and Exchange Commission Chair Mary Jo White said on Friday.

“It is something we have been encouraging for some time. There have been venture exchanges approved by the SEC before,” White told reporters on the sidelines of the Practising Law Institute’s SEC Speaks conference.

“Clearly what we are looking at is how do we improve ... the liquidity for the securities of small companies,” she said.

Adopting new policies to spur the creation of venture exchanges is one idea that SEC Republican Commissioner Daniel Gallagher has been promoting for several years as a way to help start-ups.

Critics say current listing standards are often too costly and rigorous for small companies.

For those that do list, their stock is often less liquid.

Although Congress passed a law in 2012 designed to help small companies raise capital and go public by easing certain burdens, many say the measures fall short and that more must be done.

Venture exchanges typically have not fared well in the United States, though there has been some success in Canada.

Canada-based TMX Group runs a venture exchange that counts 80 U.S. firms among its 2,200 listings, its chief executive, Lou Eccleston, said in a recent interview.

Eccleston said he sees the potential to launch a similar venture in the United States, but added that he has no immediate plans to do so.

White did not elaborate on what next steps the SEC may take concerning venture exchanges, and it is unclear whether there would be enough support on the five-member commission for new rules on venture exchanges.

SEC Democratic Commissioner Luis Aguilar told reporters on Friday that he recognizes the important role that venture exchanges can play, but said the SEC should first carefully analyze why prior efforts to launch them had failed.

Gallagher said on Friday he was glad to hear of White’s interest in the issue, but noted that some questions remained on whether the SEC might need a boost from Congress to be effective.

For instance, under the federal unlisted trading privilege rules, stocks listed on the New York Stock Exchange or Nasdaq are allowed to be traded on rival platforms where they aren’t listed.

But such a model won’t likely work for a small company listed on a venture exchange, he said.

“I know Congress is interested in this issue,” Gallagher said. (Additional reporting by John McCrank in New York; Editing by Bernadette Baum and Paul Simao)

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