A pair of U.S. congressmen have proposed a bill designed to enhance the competitiveness of U.S. capital markets, and bolster initial public offerings, by allowing US stock exchanges to create rivals for venture exchanges in Canada and Europe.

Democratic congressman Gregory Meeks and Republican Vito Fossella introduced bipartisan legislation that would allow exchanges to establish developmental tiers in an effort to expand listing opportunities in the U.S. for smaller companies.

“The legislation would remove the barrier to creating developmental listing tiers on the New York Stock Exchange, the American Stock Exchange and NASDAQ,” they noted. “Under the bill, all securities listed on a developmental tier would be subject to Securities and Exchange Commission oversight and state blue- sky regulations in an effort to uphold investor protections.”

The bill imagines that the listing standards for developmental tiers will be less stringent, but the legislation would require that the securities offered on them be subject to both state regulation and the regulatory authority of the U.S. Securities and Exchange Commission. As public companies, they would also be required to fully comply with the securities laws of the U.S., including Sarbanes-Oxley.

The legislation is aimed at reversing a trend of overseas exchanges such as the Toronto Stock Exchange and the London Stock Exchange’s Alternative Investment Market from recruiting U.S. IPOs.

“The inability to develop an additional, developmental tier can be a significant impediment to an exchange’s ability to compete in the global marketplace. These barriers make our markets less competitive for small cap listings and can drive companies to list outside the United States. This legislation will help ensure an even playing field for all domestic exchanges to compete in a global marketplace. It would also enhance investor protection by strengthening oversight of these companies,” Fossella says.

Meeks adds, “The U.S. capital markets are the strongest and most efficient in the world. However we cannot rest on our laurels as other nations naturally seek to develop their own markets and make them more globally competitive. London is major economic center and our closest competitor. Their Alternative Investment Market is attracting capital worldwide. The U.S. must take the necessary steps to maintain our capital markets as the premiere choice for companies big and small worldwide.

Meeks is a member of the House Financial Services Committee and the Chair of the Congressional Services Caucus. Fossella is Chairman of a new Republican Policy Committee Task Force focused on ways to enhance the capital markets and U.S. economic competitiveness.