Regulatory debates are often so filled with misleading hype and special pleading that one despairs of any truth being found. The controversy over flash trading of options is a refreshing exception.
The flash trading debate has shown the derivatives market in
a good light.
Position papers arguing against the proposed ban on flash
trading of options, signed by the CBOE’s Bill
Brodsky, Michael Simon of ISE and the Boston Options
Exchange’s Tony McCormick, have dissected this
issue with forensic precision.
All are anxious to avoid a regulatory clampdown that would
hurt their interests, and which they maintain would also damage
the market as a whole. Not just market intermediaries would
suffer, they claim, but also end users of derivatives
– in this case, retail investors.
So far, so familiar. Every time a law or regulation
threatens companies’ freedom to make money, these
are the terms in which they couch their opposition.
Strident protests of this kind were heard all summer in the
US, over CFTC chairman Gary Gensler’s plans to
impose position limits on commodity traders, especially in
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