A Simple Stock and Bond Market. Would it survive ?

[Lakewood90712]

Imagine : Long positions only, no options, derivatives , credit default swaps, etc. How much of the financial services industry would survive ? Would it be better for investors, not speculators, would it work ?

 

[dallas27]

It would bring global business risk taking to a near halt, and likely destroy growth as we know for a couple decades. Finance would be All but shattered.


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[pb4uski]

I don't agree. It would be a minor bump in the road.

I would like to get rid of short selling though. What other asset is some allowed to sell without owing it other than stocks? Doesn't make sense. We need investors, not speculators.

 

[yakers]

And only verbal trading on the exchange floor, no HST.

 

[Lakewood90712]

And only verbal trading on the exchange floor, no HST.

Reminds me of this article Wall Street’s most photographed trader defends NYSE photos - MarketWatch

The NYSE floor trader says they are not Relics .

Unfortunately , I think I am .

 

[Lakewood90712]

These guys wouldn't like it much Here’s the advantage high-frequency trading firms have over everyone else - MarketWatch

 

[NW-Bound]

Some of the modern derivatives are just instruments for financial institutions to self-destroy and require the government to bail them out, as we have seen in the fiasco of 2007-2009.

The other instruments such as options are ways for investors to hedge, and to lock in a price in the future. Imagine if farmers cannot secure advance contracts to sell their harvest. Some countries do not even have fixed-rate mortgages, which are really a contract to lock in the interest rate, and the home owners have to pay a floating rate based on the market.

About short selling, Robert Shiller in his Irrational Exuberance book cites this as a way to temper stock bubbles. He says one reason the housing market developed into such a bubble in 2005-2006 was that there was no way to short houses and to restore balance to the market.