From an enforcement standpoint, the issue with self-matching is similar to those faced  with cybersecurity, or with technology issues generally. Everyone involved knows that there will be failures; i.e., that firms will self-match, or will be the victims of cyber breaches, or will have technology failures. Accordingly, it would be clearly improper to criminalize or even penalize failures that are inevitable, and do not result from material negligence. The problem that regulators…

While there are certainly benefits to the LSOC model that could make it worthwhile, the Professor does not fully acknowledge the much greater costs and higher margining requirements that the actual implementation of this model would require. Further, he likely overestimates the benefits of an insurance system for this particular market. Most institutional investors, who constitute most of the participants in the futures markets, are generally indifferent to insurance because the amount…

Commissioner Gallagher was a thoughtful and serious regulator at the SEC. He took very seriously his responsibility to implement financial regulations that would both protect investors and serve the economy. He was a constant but reasoned critic of the regulatory philosophy that simply argues for "more" (the more regulations, the better). Perhaps the most powerful argument he made against this self-defeating approach was a visual demonstration, represented in a mind-boggling chart, of the…

Commissioner Stein's statement that dark pools may no longer "perform the functions that were originally intended" is worth analyzing: by whom were they intended? Dark pools were never contrived by the regulators; rather, dark pools were a reaction by market participants to a regulatory scheme that was controversial when adopted. Two Commissioners dissented. Anyone who rereads those…