Here are two simple changes that only the most self-interested, reckless players can lobby against. And they have. But sane minds must prevail:
1. Credit Default Swaps markets must be listed, regulated and open so that all sides can see what is where, and what risks are not covered.
2. High frequency trading must be greatly curtailed starting with lengthening the amount of time trades must remain open in order to be valid. Allowing trades to be posted and retracted 300 times faster than the eye can blink, is absolute lunacy. There is no good (other than bad faith profits gleaned by volume hungry exchanges) that can reasonably be argued in support of this reckless nonsense.
Here is John Mauldin (Republican) this weekend:
“CDS markets should be moved to an open regulated exchange. And while we are at it, high-frequency trading should be stemmed. This could be done easily by requiring all bids or offers to last for at least one second, instead of a few microseconds. You make the offer, you have to honor it for a whole second. What a concept. That would not hurt liquidity, but it would cut into the profits of the exchanges (especially the NYSE) – but I thought these were public markets and not the playground of the privileged few.
If it weren’t so cold here in New York, I might just wander down and join Occupy Wall Street and see if I could enlighten a few minds. If those kids only knew what they really should be protesting.”
;
As the fiddling Nero’s continue their madness the eventual outcome is evermore clear ….perhaps they should be singing “nearer my god to thee”…..maybe they are.
“People of privilege will always risk their complete destruction rather than surrender any material part of their advantage.” …… John Kenneth Galbraith (HT to Jesse’)
http://www.youtube.com/watch?v=iHsx1cvACkY&feature=related
Re: High Frequency Trading
This is an insidous parasite that should not just be trottled back, but banned. There is not real wealth creation by these firms. Trading hundreds of time faster than people can assess or decide is ridiculous.
They perform almost none of the classic roles of their ‘host’ exchanges (from wikipedia);
Raising capital for businesses,
Mobilizing savings for investment,
Facilitating company growth,
Government capital-raising for development projects,
Barometer of the economy,
Corporate governance,
Profit sharing,
Speculation, and
Creating investment opportunities for small investors.
By focussing on speculation these companies do great harm by damaging the other roles of exchanges and in particular the last. Truly privatizing the profit and in a perverse twist, ‘privatizing the socialization’ of exhange client losses! Capitalism at its saddest.