International Herald Tribune – For those who favor open markets and open investment management, it may look like the best of times. But it may really be the worst, and we may not learn just how badit is until something horrible happens.
Never have U.S. stock and bond markets been more open and subject to better regulation. Corporate bond trades are now disclosed, just as stock trades are. New rules protect investors incompanies and mutual funds.
But more and more trading, and more and more money, now fall outside virtually all regulation. Hedge funds trade with practically no disclosure of what they are doing.
And both they and others trade, without disclosure, derivatives that had not been dreamed of when the regulatory structure was established more than half a century ago.
These developments are among the little-noticed changes that have taken place in the past two decades. Alan Greenspan, the former Federal Reserve chairman, and the derivatives industry won theargument that regulation of new instruments would just drive them offshore.
In any case, they argued, the players in the derivatives markets – the big banks and institutional investors – were regulated, so why worry if the market itself had no regulatory oversight?
But now many of the traders are hedge funds.
