US exchange regulation: The land of not so free trade
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Foreign Exchange

US exchange regulation: The land of not so free trade

Time has allowed the dinosaurs – the US exchanges – to evolve and then go hunting once again.

Probably the best way of keeping in touch on a daily basis with the numerous developments occurring across multiple markets is to read John Lothian’s excellent newsletter at www.johnlothiannewsletter.com. John is also working on a project he calls MarketsWiki, which explains itself really.

This week, John sent out a newsflash announcing that the US Department of Justice had, “based on its extensive experience investigating competitive conditions in various financial markets, including financial futures, options, and equities,” come to the conclusion that, “certain regulatory policies governing financial futures may have inhibited competition among financial futures exchanges, potentially discouraging innovation and perpetuating high prices for exchange services.”

Specifically, the Department has focused on the control of clearing by exchanges, which it said, “has made it difficult for exchanges to enter and compete in the trading of financial futures contracts.” This is something that should have been addressed years ago, but instead what has happened is that the so-called ‘Land of free trade’ has managed to stymie more competitive entities, such as Eurex and Liffe, and prevent the innovators from Europe getting a foothold in their market through red tape, lobbying and downright protectionism.

Time has allowed the dinosaurs – the US exchanges – to evolve and then go hunting once again.

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