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  • Make put and call options subject to the doctrine of insurable interest. Outside hedging - which should always be subject to the doctrine of insurable interest - puts and calls serve no legitimate purpose that I can see. That kills non-linearity and extra margin (the two most troublesome aspects of puts and calls) dead in one blow, without harming the legitimate functions of these tools.

  • Similarly, make commodities markets open only to participants who actually have the capacity to make or take delivery, and do not permit them to purchase more futures than what they can take delivery of.

  • Enact a blanket prohibition on naked shorting of any kind.

  • Make over-the-counter securities and commodities derivatives legally unenforceable. Security and commodity derivatives need to go on exchange. Make all attempts by private players to deploy their own economic power to force compliance with such contracts a form of blackmail.

  • Oh, and a blanket 2-5 % Tobin tax on all exchange transactions should kill much of the excessive liquidity dead.

Similar schemes can easily be devised for blowing out an atom bomb over black-hat speculation in other markets.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Jul 30th, 2009 at 02:21:57 AM EST
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