Be wary when you hear talk of “derivatives” without further qualification. They fall into three quite distinct categories: exchange-traded, over the counter (OTC), and swaps. Here is the best overall paper I know on that division. Wikipedia is useful as well.
I’ll cover swaps in a separate post soon, so for now let’s set those aside.
Exchange-traded derivatives include the instruments traded at the Chicago Mercantile Exchange and The New York Stock Exchange. Their regulation has overall gone well and no one serious has alleged that they are responsible for our current financial problems. That said, a single regulator is preferable to our current dual SEC-CFTC structure.
More from Tyler Cowen. There is a lively debate in the comments to this post.
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