Tuesday, January 12, 2010

Professor Jayanth Varma On Derivatives Regulation

If you have not visited or know of Jayanth Varma and his terrific blog, you need to go and visit NOW.  He has one of the most underrated finance blogs on the internet.  Very informative and well written.

Professor Varma's most recent post deals with the topic of Clearinghouses vs. Registered Exchanges.  It also has some outstanding links inside his post.  Darrel Duffie and two co-authors have a terrific paper written on the topic.  I could put the links here now, but I want you to GO VISIT HIS SITE!!!!!

I strongly believe that registered exchanges are NECESSARY for derivatives trading.  Letting Clearinghouses do it is letting the dealers/traders to regulate themselves.  As Alan Greenspan so painfully taught us with the systemically threatening banks, SELF-REGULATION DOES NOT WORK.

So even if you feel you know this topic well, I 'm sure you can learn more with Professor Varma and his links.

Update: We also know self-regulation doesn't work by looking at Larry Summers' double chin.

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