Three cheers amid a scornful silence
|Most creative action by a
When planning FOW's awards for innovation, we felt it
was only right to consider the regulators - a category of
market participant that probably bulks larger in the futures
and options world than it does in many other areas of financial
We therefore included a category for "Most creative action
by a regulator". It may not be surprising that no regulators
put themselves forward - it is good to know that they have
better things to do than applying for awards.
However, all our Awards were open for third parties to
nominate candidates they felt should be considered. In fact,
four of our entrants came into the process this way.
However, none of FOW's readers felt moved to
recommend any regulatory action for an award. Yet we still felt
it would be interesting to find out what our judges thought of
this issue. So we asked all of them to suggest a possible
winner of this award, if they could.
Look away now, regulators - the great majority of our judges
could think of nothing creative you had done for a whole
"Difficult," one panellist mused. "The most creative action
for most regulators would have been to shut themselves down. No
regulatory initiative currently springs to mind but I will keep
It got worse. "I think regulators are a cancer on markets,
so I am never going to say anything that they do is good. The
fact that none put anything forward says it all," wrote one
trader in London.
More generous - or perhaps more ironic - was a US
trader, who did not have a winner for 2008-9, but added "by
next year at this time and considering the current environment,
I am sure there will be several actions that will be considered
But while it is important to say that the majority of market
players in this sample had little admiration for the
regulators, or worse, there were three exceptions.
A banker in London nominated the Financial Services
Authority for writing the Turner Report on the origins of the
credit crisis. "It was a good report, and well respected," he
Another banker, in Singapore, chose the US Commodity Futures
Trading Commission, for its no action letter in November 2008
allowing the Korea Exchange's futures on the Kospi 200 index,
the South Korean equity index derivative, to be offered and
sold in the US.
There was a sting in the tail, however. He added: "Only in
that by receiving the award it should encourage the CFTC to
grant Part 30 exemption." This would entitle US-based investors
to open accounts with entities in Korea.
But perhaps the most surprising choice was from a UK broker,
who wrote: "This goes to - the US SEC, 19 September 2008. The
SEC ruled to prevent short selling of financial stocks to
protect investors. Similar measures were taken up across the
globe by many other regulators, actions which allowed some
cooling off and prevented gang-run short selling on financial
shares. I firmly believe this action, post the collapse of
Lehman, gave precious breathing space to Morgan Stanley and
Goldman Sachs, to name but two, faced with a similar fate. Had
either collapsed, the consequences were (and are)
Many market participants, and certainly most that were
quoted in the press, had only contempt for the shortselling
ban, calling it useless or counterproductive - even though it
is impossible to prove or disprove the effectiveness of such a
ban, since it occurred in a real situation with no control
experiment to compare it with.
In the light of that general opposition, this was an
original and interesting choice.