Friday, April 30, 2010

Is NYDE next for NYSE - could ADD derivatives trading, clearing - why not?

For over a century the NYSE has functioned and functioned well as a trusted, regulated and most important OPEN "market place" displaying timely relevant data for stocks, bonds and more recently I believe certain options (derivatives contracts upon stocks).

Importantly, the NYSE has reported stock margin borrowings for decades, and has assisted investors in understanding this - how much so called "market value" is accounted for by speculative money and associated speculators - failure to report such borrowing in the MBS derivatives and related "so-called" markets denies market participants a true measure of value - that of 100% "fully paid for" securities - a measure notably absent when single, discrete, and I might add too "discreet" firms.

SO WHY NOT ADD MBS DERIVATIVES AND ANY OTHER DERIVATIVES.


TAKE AWAY THE ABILITY OF SINGLE FIRMS like Goldman Sachs, Morgan Stanley et al to make markets in certain types of contracts
when - as we have seen - pose too many, some insurmountable conflicts of interest.

This proposal continues to allow the Investment Banks to "create" new contracts - but the price discovery of OPEN markets is a liqidity enhancer; that is if the contracts themselves are viable in helping investors manage risk. Because as we know - at base - that's what it's all about.

Ending the siesta on the US taxpayers' dime one simply stated, easy to digest little blog at a time.



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