Great article in NY Times - re control of derivatives trading by small cabal and how these things go on behind the scenes affecting traders, businesses, ordinary Americans, etc. Yet, both the business press and self-styled "cybersleupps" miss the big picture, typically focusing on the personal and penny ante, but not the system. Years ago, they would defend the market makers, saying "no such thing as MM scam," "just doin' their job," etc.
Long article, urge all to read
nytimes.com
Indeed, the derivatives market today reminds some experts of the Nasdaq stock market in the 1990s. Back then, the Justice Department discovered that Nasdaq market makers were secretly colluding to protect their own profits. Following that scandal, reforms and electronic trading systems cut Nasdaq stock trading costs to 1/20th of their former level — an enormous savings for investors.
"When you limit participation in the governance of an entity to a few like-minded institutions or individuals who have an interest in keeping competitors out, you have the potential for bad things to happen. It’s antitrust 101,” said Robert E. Litan, who helped oversee the Justice Department’s Nasdaq investigation as deputy assistant attorney general and is now a fellow at the Kauffman Foundation. “The history of derivatives trading is it has grown up as a very concentrated industry, and old habits are hard to break.”
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