Are For-Profit Markets the Cause of Volatility?

Floyd Norris has today’s must read discussion on avoiding another May 6th (MAYDAY MAYDAY WE ARE GOING DOWN. OVER) type of day at the exchanges.

He points out 4 factors that regulators (or deregulators) need to consider when trying to fix this

1. Markets are utilities for investors.
2. Price discovery is an important function of markets.
3. No evidence that investors caused the crash.
4. Functioning markets require someone to provide liquidity.

These days, we seem to have replaced the exchanges as monopolies with a loose form of anarchy . . .


Time for Regulators to Impose Order in the Markets
NYT, May 13, 2010

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