If Congress were serious about their job of regulation to prevent harmful and abusive practices, your proposals are all no-brainers. And not a single one of those regulations impedes legitimate capitalization practices. But then again, we know Congress, both Rats and Pubs, care almost nothing about our country, but instead care most about being re-elected. And being re-elected requires prodigious campaign baksheesh paid by the foxes to the hen-house keepers.
Really, your proposals are nothing but anti-gambling provisions, because the practices your proposed regulations seek to rein in are indeed nothing more than gambling and serve no legitimate financing purposes.
And while we’re at it, we should fix the abusive practices in the stock market, where 70% of all trade positions are held less than a second. After all, almost current stock market practices have no legitimate finance purpose and serve only as a form of gambling. Here’s a few proposed regulations (I’m sure you can come up with some others):
1. All stock positions have to be held for at least one business day.
2. No trade order that has been placed can be cancelled for at least one minute.
3. All futures contracts require physical delivery upon expiration.
4. No futures put contract may be sold unless you own the underlying commodity.
5. Naked put and call options are illegal.
I’d go after HFT with a either a transaction tax or a technical regulation. Don’t create regulations which mandate that you own shares for a minimum amount of time... because down that road is madness.
To eliminate HFT, all we’d need to do is one or two things:
1. A transaction tax. Say, oh, a penny a trade (sale or buy). HFT immediately ceases to be profitable, so they stop it.
2. Require that all bids put out onto the wire be active for one minute. If you offer to buy a stock, you have to have your bid out there for one solid minute, or until you get a fill. Whammo, HFT tape-painting is over, and without that, HFT’s start running into serious risk and it’s over. This is essentially your #2, and I agree with it vehemently. Just add “or until filled” and it’s good.
As to your other proposals: I’m not sure of your proposals, esp. 3, 4 and 5 where the commodities markets are concerned. If you’re talking about stock or index futures markets... then physical delivery doesn’t make as much sense, so I think you’re talking about commodities: Here’s my explanation:
Your #3: You should allow cash settlement, because it’s necessary. Let’s say you’re a farmer. You’ve sold a contract on corn to deliver in the winter as part of your marketing program. Your corn crop is in the ground and it’s July.
This hits your #4 as well, as the farmer doesn’t have the corn *yet*.
You don’t have the corn yet, but you’re actively “long” corn as you’ve invested in putting seed into the ground.
A hailstorm comes along and wipes out your corn crop. You won’t have the corn to deliver on the contract unless you reach out into the market to buy physical *and then store it* until you can deliver it on that contract. That’s additional expense and hassle. Just settle the contract for cash and be done with it.
To your #4, per the above: Farmers (and others) need to sell contracts as part of their marketing plans. They might not have the commodities in hand at that time, but they’re producers of said commodities and should be able to sell contracts in advance of harvest (or mining, or logging, etc) to capture good prices for their products. This is the very nut of the commodities markets. If producers cannot sell contracts ahead of harvests of the physical commodities, then there is simply no reason for the commodities markets to exist and we should go back to cash marketing.
To your #5: Naked put or call options are very useful instruments for buying or selling the markets. If a consumer of commodity “X” would love to buy a huge quantity of “X” if the price were to drop that low, then all he has to do is sell a put. If the price drops that low, he gets assigned - but if it didn’t, he got paid for waiting.