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Strategies for a discontinuous future.





Consulting & advisory, research notes, in the press, about bubblegen,
next wednesdays.





Tuesday, October 14, 2003
 


The Wall Street Virus, Part 1:

The boards of directors of many of the big exchanges are less than fully independent. In fact, they're actually riddled with conflicts of interest.

"Charles P. Nastro, the former managing director at Lehman Brothers Inc. and the co-head of its futures divisions, served as one of three "nonresident" or outside voices on the Chicago Board of Trade from 1997 to 1999."

That is truly incredible. If you don't get it, here's the problem: the CBOT is one of the biggest (and oldest) futures exchanges in the world. This quote means that the head of the options group at one of the biggest banks was helping regulate the exchange. But the banks also trade on the exchanges for massive profits and for their clients.

So there's a huge conflict of interest if a bank's trading and making the rules that govern trading. Remember, the market is also made up of large numbers of smaller traders who aren't the big banks. So, unless these guys are represented on the board too - which they never are - the governance is fundamentally balanced in favour of the big banks.

I think Wall Street is the most potent virus the US has ever seen. Guess who still has the freedom to place lots of pre-IPO shares and disclose relevant information only to their biggest clients?

-- umair // 6:57 AM //


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