The Derivatives Market s Helpful Enemies

It did not require taxpayers to bail out the parent company s derivative counterparties.

Similarly, when asked whether he should regulate the market in derivatives, he replied, These derivative transactions are transactions among professionals.

Indeed, today the market for derivatives is oligopolistic, with a few banks running huge profit margins.

Even back in the 1990 s, regulators would privately complain of the difficulty of retaining any staff capable of understanding the rapidly evolving derivatives market.

America does need a clearinghouse for derivatives, and a much higher percentage of derivative trading should take place on exchanges, rather than bilaterally over the counter.

In the future, governments should not bail out failing financial institutions derivative counterparties, even when they provide a safety net to some of these institutions creditors (such as depositors).

Fukushima and Derivatives Meltdowns

Those areas of the financial sector that have suffered the most reputational damage are the ones least subject to regulation and supervision the derivatives market, hedge funds and private equity funds, and the ratings agencies.

A United States Special Inspector General recently issued a report criticizing the US government for failing to insist that AIG s counterparties in the market for financial derivatives bear some of the costs of bailing out the company.

The markets for other derivatives are not much better.

Nonetheless, we should still worry about their ability to blow themselves up in a novel and creative fashion hence the need for the Volcker Rule, derivatives reform, and new rules for money market funds.

In any event, concerns about insurance policyholders should have led, at most, to a governmental commitment to back their claims if necessary. It did not require taxpayers to bail out the parent company s derivative counterparties.

True, someone has to come first. Other financial players take on more risk because derivatives and repo players bankruptcy exemptions put them first.

And, if the problem is systemically risky derivatives trading in banks and elsewhere, then the priority given to derivatives traders over nearly every creditor ought to be curtailed.

But not all investors are able to trade derivatives.

But an important disadvantage of derivatives is their short maturity.

Advanced economic systems have very complex webs of contracts, such as financial derivatives.

Regulators should insist that traded derivatives are homogenous, standardized, and transparent.

Derivatives traded on exchanges should be registered as a class.

Individual derivatives and repo transactions are hardly nefarious.

Substitution of CO by Lewis bases, L, to give derivatives Fe(CO)5 xLx.

The explosion of derivative instruments has demanded such an effort at understanding that metaphorical language is needed.

The solution was to create a much larger market a single market.

Some derivatives, particularly credit default swaps should not be traded at all.

The huge losses on derivate transactions were generated by AIG s financial products unit.

A Hacker s Market?

Will it be in housing again? Will it be in the stock market?

We are rebuilding derivatives and related financial structures atop the same, still active faults.

Derivatives can serve many useful purposes, but they also contain hidden dangers. For instance, they can pile up hidden imbalances in supply or demand, which may suddenly be revealed when a threshold is breached.

This is a clear demonstration of how derivatives and synthetic securities were used to create imaginary value out of thin air.

Civilizing the Marketplace of Ideas

Stock Market Fantasies

The Zoma street market

City market of Battambang

Kampot fish market

But no recovery in the labor or housing markets has yet materialized.

The public perceives Fukushima type risks and derivatives risks differently. Many fear nuclear risks, which are vivid, slowing the industry s development amid safety concerns.

The use of derivatives and other synthetic instruments must be regulated, even if all the parties are sophisticated investors.

Tailor made derivatives would have to be registered individually, with regulators obliged to understand the risks involved.

Registration is laborious and time consuming, and would discourage the use of over the counter derivatives.

At this point, the government asked AIG s derivative counterparties to take a voluntary haircut that is, accept a discount on the amount owed to them.

When some of these parties refused, the government backed down and financed AIG s payment of all of its derivative obligations in full.

Plant derived Prior to Paracelsus, the vast majority of traditionally used crude drugs in Western medicine were plant derived extracts.

Tedco Industries' pre merger share of the relevant product markets was. (i) 65 per cent of the bedding market (ii) 36 per cent of the furniture products market (iii) 24 per cent of the case goods market and (iv) 11 per cent of the upholstered lounge suites market