I confess that I have not followed the swap-futurization thing closely but my assumption was that the politico-regulatory view was:
- Swaps are evil instruments of financial instability and fraud and should be discouraged, and
- Listed futures are mostly harmless.
I mean, look around. Swaps blew up AIG, Oakland, Monte dei Paschi, the U.S. housing market, whatever. Futures just blew up those old guys in Trading Places.
You can have various objections to this preference for futures,1 but surely the most compelling is that swaps and futures are to some reasonable approximation the same thing. They’re just delta-one exposures to some underlying quantity; calling them a “swap” or “future” doesn’t matter economically.
That, anyway, is Bloomberg’s line of argument: Read more »
To the many atrocities that can be attributed to Dodd-Frank, add the persecution of derivatives brokers. Read more »
One of the joys of structuring financial products is that, when a regulatory door is closed, a window / chimney / possibility of sawing through a non-load-bearing wall is opened, and you get to look for it, and if you find it you get rich.* So I for one look forward to the response to this:
On Monday, the Commodity Futures Trading Commission rejected a plan for so-called political event contracts, wary that mixing politics and trading would create a dangerous cocktail. The agency ruled, in part, that such trading amounts to gambling — and that it could unduly influence election results.
“This is a very slippery slope here,” said Bart Chilton, a Democratic member of the commission. “We need to be supercareful about handing part of our electoral process over to the trading pits.”
So now you can’t go on NADEX and buy presidential futures – have I mentioned that all my money is in Rick Perry futures? I will sell them to you at cost if you’d like – but you have, I suppose, some other options. You can buy mine, of course, or whatever else is kicking around on Intrade, and if you’d like more size you could probably go to our Anonymous Sports Book Manager, if you can find him. Read more »
The only real upside is that the 0.3% annualized contraction in the third quarter was less than the 0.5% that was generally expected. I’m not really sure how to take that, other than as a sign that the market is hopelessly clueless. But that’s not really new, is it?
Economy Shrinks as Consumers Retreat [CNBC]