Monopoly, manipulation, and the regulation of futures markets
Article Abstract:
The threat of monopoly and manipulation in the futures markets is assessed in order to determine whether entry into this market should be so heavily regulated. The costs of monopoly in futures markets and the markets' responses to these costs are assessed. Precautions against monopoly taken by exchanges are examined, as well as some cases of actual or asserted monopolization. The evidence suggests that, although there are some episodes of monopoly and manipulation in futures markets, they are very few. There is no strong justification for either imposing regulations on trading or restricting the creation of new contracts because the exchanges seek to select the appropriate mix of precaution and penalty.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1986
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An analysis of the role 'insider trading' on futures markets
Article Abstract:
The role of insider trading in futures markets is analyzed, and the evidence that might be collected regarding correctable abuses associated with insider trading is discussed. Informed trading, as distinguished from insider trader, generally adds to the liquidity and efficiency of futures markets. It is extremely difficult, however, to isolate those trades which enhance liquidity from those which decrease liquidity. If fair trading - trading that is volume enhancing - is to be the objective in preventing trading based on private information, then any regulations enabling this standard should require a cost-benefit analysis of the effect of restricting trade.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1986
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Regulatory conflict and entry regulation of new futures contracts
Article Abstract:
Exchanges that sell transactional services must meet strict regulatory guidelines before a new product such as a new futures contract can be introduced. The history of entry regulations is summarized, and the existence of fraud as a systematic problem in futures markets is refuted. Even if futures markets were prone to fraud or some other type of market failure, prior government approval of all new futures contracts would be an inefficient regulatory response. No theoretical or empirical basis exists for the current regulation of new futures products, and such barriers to entry in the market should be eliminated.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1986
User Contributions:
Comment about this article or add new information about this topic:
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