Freedom of Expression
Stock Market Not a Casino, Sen. Maria Cantwell
Derivatives trading, a super risky stock market investment practice often used by hedge funds, those lovely things that helped our nation's economy collapse, are nothing more than gambling and should be regulated just like casinos, according to U.S. Sen. Maria Cantwell (D-Washington).
"The derivatives market has done so much damage to our economy and is nothing more than a very high-stakes casino -- except that casinos have to abide by regulations," said Sen. Cantwell in a press release. "Even in Las Vegas at the Blackjack tables, both the House and the player have to have capital behind their bets. But we allow Wall Street to continue to operate in the dark and without capital to back up bets on derivatives. We remain at risk of further harm until we have the tools to stop abusive speculative practices."
If you do not think the comparison between derivatives trading and gambling is serious, a provision in the Commodity Futures Modernization Act of 2000, actually exempted derivatives traders from state gambling regulations. After the law went into effect, trading in the derivatives market increased from $80 trillion to more than $600 trillion a year. Sen. Cantwell has introduced a bill that would repeal that exemption, once again making derivatives traders subject to regulation as a form of gambling.
Sen. Cantwell's bill (S. 2763), co-sponsored by Senators Ron Wyden (D-Oregon) and Bernie Sanders (I-Vermont), would empower state gambling regulators and attorneys general to examine unregulated derivatives trading and take appropriate action to protect citizens from practices considered potentially harmful to the economy.
"Congress must take a strong stand to prevent the kinds of abuses that have cost American workers and taxpayers so much," said Sen. Cantwell. "Empowering states restores an important layer of protection."
Above given is an excerpt from the talk given by Senator Cantwell introducing her revolutionary bill that if passed will bring some important economic reforms in the US economy.
To understand the real difference between a real value transaction and a speculative transaction is required, and when it is clearly explained; Commodity Futures Modernization Act 2000, can be repaired effectively. This is pertinently important to note that passing this bill, in view of the reality that a very strong lobby of speculators is behind this exemption of derivatives from state gambling regulations, is not an easy task. This lobby strongly supported by many senators and highly placed bureaucrats, financially backed by strong operators from the market, will oppose any such regulations tooth and nail. Once all transactions based on notional values are declared as gambling transactions and removed from real value trading transactions the glamour and thrill of the stock market and other online trades will disappear. These markets will be lackluster like any other trading post and that may not be liked by many involved in these activities. Even internet service providers will oppose it; since such regulation will remove a considerable portion of their business. Actually regulation of such transactions should be made an essential part of so-called economic reforms to make it more effective. To make such corrective Acts more effective, an additional Regulating manipulations of prices’ Act, at the stock market be introduced. And if so done, wrongful operations will cease to work; that will bring the market at its most natural level, the final solution to present problem the world is facing! I wish Indian Government follows Maria Cantwell; bring discipline to this unruly market.
Supporters of this a bill should justify it by explaining how uncontrolled spread of speculative activity has damaged the economy of the world. Loss of glamour, thrill and shine of the stock and derivatives market should be accepted for the over all improvement of world economy. I feel a patriotic appeal will also numb down lobby of speculators and net service providers. Such corrections are required in all the countries where markets are indulging in speculative activities.
What prompts people to take interest in such deals, if comprehended properly; regulatory bodies will be able to work effectively. Greed for easy money, earning money without hard work or lazy money, glamour, thrill, social status- given by this market, show of guts and daring are some important basis, that induce youth to this speculative market.
By definition, trade transaction based on real value is considered real transaction and a transaction based on notional value (not presently functioning) is considered speculative transaction. Even if, of all the values involved in a transaction only one value is notional, that deal becomes a speculative deal. Most gambling transactions are having one other element and that is time; this time or period of time (time limit) decides the effectiveness of the transaction. From this definition one can easily see the difference in the two types of transactions. All forward trading, swaps, derivatives and so on so forth, come under this class and they can be differentiated from real trade.
There must be a restriction by which no speculative trading can be done in the same premises as real trade. Today both real trade and speculative trade are operating from the same place; that be stopped.
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