The European Commission is planning a "paradigm shift" in its approach to the derivatives market, moving towards strict regulation of a sector which has been blamed for worsening the financial and economic crises, according to a draft document seen by EurActiv. "The Commission believes that a paradigm shift must take place away from the traditional view that derivatives are financial instruments for professional use, for which light-handed regulation was thought sufficient," reads a draft communicationword on derivatives to be published this week. According to the document, future regulation in the sector must lead "towards an approach where legislation allows markets to price risks properly". A number of legislative measures will be proposed in the course of 2010, it adds.
"The Commission believes that a paradigm shift must take place away from the traditional view that derivatives are financial instruments for professional use, for which light-handed regulation was thought sufficient," reads a draft communicationword on derivatives to be published this week.
According to the document, future regulation in the sector must lead "towards an approach where legislation allows markets to price risks properly". A number of legislative measures will be proposed in the course of 2010, it adds.
...A number of legislative measures will be proposed in the course of 2010, it adds.
Might as well wait until 2011 or '12, since there may be a self-correcting aspect to derivatives and derivatives of derivatives and derivatives of derivatives of derivatives.
Smart people have been pointing out the terrorist nature of these devices for several years. The collapse of the market that they caused which required massive use of the credit of the commons started 2 years ago. Why are they waiting?
...future regulation in the sector must lead "towards an approach where legislation allows markets to price risks properly".
But there is the rub. That is the whole basis of the stock market. Somebody thinks that the value of some share is too high and someone thinks it is too low.
In typical human fashion, they are attacking the wrong target. The market CAN price the risks properly, just not on a moment by moment basis. There were two or three rating agencies who supposedly allowed the risk to be properly assessed. Are they going to set up another? Perhaps a Financial Dictator who isn't connected to terrorist organizations.
But one would think that someone could pick up that hammer from within the EU establishment already. Surely there are anti-fraud, anti-rackets, anti-terrorism divisions already. . . and not have to wait until 2011 to get started. Never underestimate their intelligence, always underestimate their knowledge.
Frank Delaney ~ Ireland
