What is so abundantly clear is that the lack of transparency in derivatives trading, and the sheer complexity that is a by-product of that lack of transparency, really can make them "financial weapons of mass destruction."
Amid pressure from the nation's largest grain association and "significant feedback," the CME Group Inc. backed off a proposed plan to extend trading hours in grain futures and options, but only by one hour.
On May 6, 2010, cascading prices triggered computer sell orders from high-frequency traders that sent securities prices plunging. Still, regulators admit they don't fully understand how best to regulate high-frequency trading.
The high-speed trades driven by computers are in the cross-hairs of regulators in Washington. In spite of the controversy, some in the industry say high-frequency trading should be allowed to run its course.
Recent arguments accuse high-frequency traders (HFTs) of a specific market distortion scheme. The HFTs, the argument goes, use their soon-to-be-cancelled limit orders to mislead large investors about the shape of the supply and demand curve.
Is the SEC looking into traditional malfeasance -- the usual seamy kickbacks or bribes -- or the more esoteric: faster portals into exchange servers for certain select customers? This range of "advantages" may be built into the very concept of HFT. Will the SEC put HFT itself on trial?
The detection of abusive patterns must happen in real-time, before any suspicious behavior has a chance to move the market. Sensing and responding to market patterns before aberrations or errors have a chance to move prices is the right thing to do -- in all asset classes.
We are not looking to the World Economic Forum delegates to reinvent the wheel. What we need is for our political leaders to look beyond the narrow and restrictive prism of austerity to put jobs and growth at the center of plans to reboot the global economy.