The NYT has a good article pointing out how the financial collapse has led to surprisingly little change on Wall Street. Toward the end of the piece it notes efforts to require that derivative instruments be traded through clearinghouses. It later uses the term "exchange" as though it is identical to clearinghouse.
This is not the case. An exchange implies that there is a market maker with an explicit bid-ask spread that can be known at any point in time. By contrast, on a clearinghouse, there is no market maker. This allows for much greater spreads and therefore much larger profits for the banks that deal in derivatives.
If you enjoyed this article, please consider making a tax-deductible donation today. For over 30 years, The American Prospect has delivered independent reporting that exposes corporate power, investigates political corruption, and analyzes threats to our democracy. Unlike many media outlets, we’re not owned by billionaires or corporations—we’re powered by readers like you.
Today’s independent journalism faces unprecedented challenges. Your support makes our reporting possible and keeps our work free and accessible to all. Whether it’s $5 or $50, every contribution helps sustain our nonprofit newsroom.
Join our community of supporters and make a donation today to help keep independent journalism thriving.
Copyright 2024 | The American Prospect, Inc. | All Rights Reserved
