Business Law Prof Blog

Bernanke Back

Economists' rejoice, Bernanke will be back.  My main complaint with Bernanke, among many, is that he preached transparency for the Fed as an academic and now blocks transparency as the Chair -- all in the public's interest of course.  In any event,  Bernanke is back and I am out -- resigning as editor.  Do not blame me for the new stuff, only the old stuff.

Securities Market Structure Redux

Flash trading, dark pools, lawsuits over proprietary trading code, whopping payouts to computer greeks that create trading programs, and other news have led Senator Kaufman to call for a "broad SEC market study."  Great,  The SEC does not need more encouragement in its efforts to restructure the securities markets.  The debate is an old one.  Should we have -- 1) a centralized securities market for each security traded with the SEC and an SRO regulating the process, a clearing house limiting credit risk, and the Fed monitoring overall market risk or 2) a "fragmented" market of multiple trading venues linked by arbs that "exploit" trading price discrepancies. The issue is not whether arbs make too much money but whether trading prices are less volitale and trading costs are lower for normal trading in 1) or 2).  1) has the disadvantage of discouraging innovation with government ossification.  2) has the "advantage" of being inevitable in a world trading market.  We need to live and deal with 2).