A cry for help

More and more industry representatives are complaining about the politicisation of the rule-making process in financial markets. In Europe, politicisation has triggered some absurd episodes, such as the proposal for the greatest uncontrolled financial market microstructure experiment in the world (aka the minimum resting period of 500 ms) and the introduction of short selling bans in the face of an overwhelmingly crushing academic verdict against them.

Do politicians really have the long-term interest of Europe at heart, or are they more concerned about vote-winning headlines?

Regulators usually have extensive first-hand experience in financial markets and they are less restricted by election cycles. So the recent open letter from representatives of the FOA and a number of global derivatives exchanges, proposing to install IOSCO as the key institution driving global regulatory recognition forward, reads like a cry for help! The industry wants regulators to reclaim the driving seat in the rule-making process on extraterritoriality agreements.

The stakes are extremely high, as painfully highlighted by CFTC Commissioner Scott O’Malia in his recent speech. The CFTC is drowning in data, with computers continuously crashing. Such is the extent of the problem, you wonder if the Commission could have spotted the “London whale” even if it had beached on the banks of the Potomac River.

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