December 13, 2010
With regard to the effect of increased regulation on U.S. equities and futures markets, regulators walk a fine line between balancing the level of regulation and the risk of a decrease in trading activity. Bart Chilton has publicly commented about his proposal for position limits to restrict a market player's overall power over the market. However, with position limits, U.S. markets will lose as market participants leave U.S. markets and enter into foreign ones. Furthermore, deciding on a level for a position limit is completely arbitrary, just as with the flash crash when deciding that trades that had a change in price of over 30% were busted, whiles those under were maintained. How can a transaction that had a 29% change remain in effect when one with a 31% change gets busted? Position limits pose a similar problem as Chilton does not know how to arbitrarily pick a number for setting the limit.