Senator Harkin: Centralize all derivatives trading under the CFTC, which I oversee

The Streetwise Professor has an article on risks involved in trading in different venues. A centralized format does not suit all participants, and tends to favor the riskier institutions and trading practices since the central trading place must view all players as equal. In a "broker" model, the individual brokers track the risk of their trading partners and price the different risk rates differently. As noted at the end of the article:

In brief, forcing a one-size-fits-all approach is doomed to failure because it fails to take into account the heterogeneity of financial instruments and financial market participants. We have the proof of experience that it is doomed to failure. But nonetheless, Harkin is playing King Canute, trying to force markets to conform to his will. Good luck with that. All it will do is create opportunities for lawyers–and undermine the efficiency and arguably the soundness of our financial markets.

I am sure that it is just coincidence that Harkin is Chairman of the Senate Ag Committee, which has jurisdiction over the CFTC–which, under Harkin’s bill, would have regulatory authority over every derivative traded from sea to shining sea. Think of the campaign contributions! The thought never crossed his mind, I’m sure.