Explain whether in your view regulating of options markets is necessary. Describe whether and how your view was shaped by recent pandemic.
Regulating of options markets
Full Answer Section
Arguments against regulation:
- Regulation can stifle innovation and make it more difficult for new businesses to enter the options market.
- Regulation can increase costs for investors and make options less accessible to retail investors.
- Regulation can be complex and difficult to enforce, which can lead to unintended consequences.
- Regulation of option sellers: Option sellers should be required to have a certain level of experience and knowledge before they are allowed to sell options. This would help to prevent inexperienced investors from making risky trades.
- Regulation of option exchanges: Option exchanges should be required to have clear and transparent rules about how options are traded. This would help to prevent market manipulation and ensure that investors have access to accurate information.
- Regulation of option disclosures: Option sellers should be required to disclose all of the risks involved in trading options to investors. This would help investors to make informed decisions about whether or not to trade options.
Sample Answer
Whether or not regulating options markets is necessary is a complex question with no easy answer. There are strong arguments to be made on both sides of the issue.
Arguments in favor of regulation:
- Options markets can be volatile and risky, and regulation can help to protect investors from losses.
- Regulation can help to prevent market manipulation and ensure that options are traded fairly.
- Regulation can help to ensure that options are transparent and that investors have access to accurate information.