I mean, people crap on Wall Street a lot for good reason, but honestly it's a reasonably well-regulated entity. It's not perfect, and you can find cases of utterly gross mismanagement (e.g. the 2008 crash), but stuff like insider trading and unregistered securities and the like do get attention from the SEC, particularly if they're reported.
I've said a lot of negative stuff in the past about the Wall Street banks, and I have come to regret most of it after learning a lot more about finance. Stocks absolutely can be a way for the "rich to get richer and the poor to get poorer", and of course the traditional exchanges aren't a vaccine against that, but I do think that they do some level of vetting to make sure that companies aren't just Ponzi schemes.
I mean, for example, WeWork had its IPO rejected in 2019 because regulators were afraid about its business model, and it only ever went public through a SPAC loophole. Clearly they shouldn't have gone public at all, but some basic sanity checking is better than zero.
To be clear, I'm totally onboard with Texas making their own exchange if they can actually do it better, or at least as-well. Competition is a good thing.
> I've said a lot of negative stuff in the past about the Wall Street banks, and I have come to regret most of it after learning a lot more about finance.
Ironically, the more I learned about finance, the more I disparage it. I worked (actually) on Wall Street back when it wasn't a strip mall. It's just a casino for the vast majority of people that call themselves investors.
I don't think that investing in stocks is inherently a casino; if I buy a share of AAPL then there's not inherently a loser; if the price goes up then both Apple and I benefit from this. Even if it goes down, I still retain whatever value the stock is currently worth. Still, I used to make sweeping statements about finance that I don't agree with anymore; I used to say short selling was inherently evil for example, and I actually don't think that anymore [1].
I do think that option contracts might be evil and a glorified casino though. It feels like they kind of end up with a means of really really rich people to extract money out of poorer people without those people actually gaining anything back; since options are (as far as I'm aware) a binary "make money or lose your entire investment" situation, and each transaction requires a winner and a loser, it definitely is very analogous to a casino.
I do call myself an "investor", but 95% of all the money I have in the market is in low-risk ETFs (VOO and VTI), which I don't think is gambling.
[1] Well, they might still be evil but I think it's a necessary evil in order to put downward pressure on the market to avoid ponzinomics.
Do you agree with the reasons? Are they the right answer to the problem, or is there a better way? Are there other downsides to the red tape that make it not worth it despite what they protect against?
We need a specific instance of red tape to have a debate about it. However the above questions will get you started in the debate.
It might be the case that, in general, people can never consider the downsides without leaving the rules in place forever. Maybe they do need to be mindlessly trashed every once in awhile, and maybe the price paid for those downsides is worth it on a very long time scale where the alternative would be for rules to only ever accrete but never shake loose. And they have to sometimes unless you believe that all regulations ever, no matter how poorly formulated are perfect.
What an unnecessarily narrow view. There are options beyond "rules are permanent forever" and "our only choice is to remove all of the rules".
But by all means, tear down all these fences without understanding why they exist. They can just be rebuilt after all, and it's not like wolves will eat all of us and our livestock in the meantime.
==It might be the case that, in general, people can never consider the downsides without leaving the rules in place forever. ==
This assumes that the rules created themselves out of thin air and we never lived without them. In most cases, existing rules/regulations were created in response to events that proved their necessity.
That regulations were created in response to events that should have been regulated does not imply that the resulting legislation was an appropriate way to solve the problem. For example: https://en.wikipedia.org/wiki/Onion_Futures_Act
The last fifteen years we've been watching crypto start from scratch and gradually rediscover the exact reason for every single securities regulation and finance convention. So idk maybe we were on to something the first time around.
That's kind of what gives me pause about Texas thinking they can do things better than the other exchanges.
It's entirely possible that they can, I'm not claiming that NYSE is perfect or anything, but in my years on this earth something has become abundantly clear to me: if there's an "obvious" solution to something, and no one is doing it, then there's probably a pretty decent reason and you're not a genius for thinking it.
The easiest example that comes to mind is the stainless steel frame of the Cybertruck that doesn't crumple, which sounds like an "obvious" good thing (no one really wants their car to break in a crash), until you realize that that drastically reduces the safety of the vehicle because a lot more of the shock transfers to the passenger, and the other mainstream car producers were already well aware of that.
Sometimes. But a surprising number of rules on US financial markets come from self-regulation. I'm not an expert, but I'd guess that these are generally the only kinds of rules that this Texas exchange would be able to avoid. Texas is still subject to federal law.
And self-regulation is one of the cases where you can be pretty sure that the rule makers are intrinsically motivated to consider the downsides as well as the upsides.
Sure, I guess I'm asking which rules the Texas Stock Exchange will be removing, and why those rules have downsides.
Entirely possible that I'll agree with the changes, though what I'm more worried about is it becoming some vague "culture war" bullshit about wokeness or something, as seems to be the only talking point being brought up in traditionally-conservative states now.
Though, as long as we're just talking about "red tape" in the abstract, and not even specific regulations, we're not even dealing with Chesterton's Fence. We're dealing with Chesterton's Vague Unspecified I-Don't-Even-Know-What.
No the regulation system as a whole is analogous to the fence. You're asking them to point to a specific picket and explain why it's there. But that's very obvious: it's part of the fence. We're still left with understanding the goal of the fence & its suitability for that, and deciding what to do about it.
The fence analogy kinda breaks down here. The sum total of regulations are like a collection of Chestson's Fences, each one added to the legal code for specific edge cases and the outcome of removing any individual one will have different results.
It doesn't mean anything to talk about reducing regulations without being specific about which rules you actually have an issue with, but it can provide the illusion of consensus.
I mean, you agreed on something, which is the bloat of a system, you just disagree on the "how to fix it" part.
If I said "We need a crane that can lift 3000lbs" and you agree, and you come up with a design that uses an electric motor system, and I come up with a design that uses a diesel engine, we still agreed on something, just not the implementation of how to do it.
I realize it's not a perfect analogy, but if you and I could agree on some bad consequence of "too many regulations" (e.g. the prices of healthcare are too high as a result of the regulations), that is some common ground. The question then comes down "which regulations would be best to cut to lower costs?" and reduces to an optimization problem.
> I mean, you agreed on something, which is the bloat of a system, you just disagree on the "how to fix it" part.
Unfortunately, the "how to fix it" part is the part that requires building political consensus. Getting agreement on X being too expensive is easy; everyone always wants everything to be cheaper.
> If I said "We need a crane that can lift 3000lbs" and you agree, and you come up with a design that uses an electric motor system, and I come up with a design that uses a diesel engine, we still agreed on something, just not the implementation of how to do it.
> I realize it's not a perfect analogy, but if you and I could agree on some bad consequence of "too many regulations" (e.g. the prices of healthcare are too high as a result of the regulations), that is some common ground. The question then comes down "which regulations would be best to cut to lower costs?" and reduces to an optimization problem.
The problem I have is that using "too many regulations" as the foundation is inevitably doomed. Lets say we find some collection of regulations that could be cut. Well, any solution is going to, at a glance, look like an additional regulation to the layman. And that's before the parasites that are profiting from the existing inefficiencies start spinning narratives about how this is another government overreach and how we're killing America.
That's the most conservative interpretation of Chesterton's Fence I have ever seen. Each rule is critical because it is included in a set of rules which are intended to help, and removing any means breaking the whole fence?
I guess you could get even more conservative and assume that the absence of a law is also intentional and we should maintain the status quo forever. I'd argue that even that would be preferable to a system where you can only add restrictions.
That's not quite what I'm pointing at here, and I also agree with the other commenter that the metaphor is stretched too far to be useful.
But if we're going to stick with it, it's very likely the fence will still work for its purpose if you remove some of the pickets. But to figure out which ones, and how many, you need to have a clear conception of the fencemaker's goal and how it currently accomplishes them or fails to. The significance of any specific part isn't a sound basis for an argument about the purpose or usefulness of the fence per se.
Do we have any indication that TXSE is arguing against the purpose or usefulness of the fence, or that they won't make thoughtful decisions about which pickets to remove? This article just calls the diversity rules, which have (afaict) no bearing on the integrity of the market.
But, for context, all I was trying to do when I accidentally started this whole side tangent was suggest that unbounded speculation that isn't tied to concrete, specific things is unlikely to be fruitful.
As far as I can tell, the only specific thing that's been mentioned is not having an equivalent to NASDAQ's board diversity rule. Which doesn't seem like a _huge_ differentiator given that NYSE doesn't have one either?
TBH though my first instinct is to say that I doubt their rules will be egregious, and in a market as large as the USA having a third national stock exchange probably wouldn't be a terrible thing. Markets generally benefit from healthy competition, even when some of the individual competitors aren't everybody's favorite.
I sometimes wish there were Talmudic-like annotated regulations that discourse upon the history and context of each regulation, down to the precise punctuation mark, word, line when those granularities have meaning, so we don't have to hold these "what was the reason" conversations in public, and have more meaningful conversations over "with hindsight, was the original reason justified" to add to those annotations.
I worked for a bank for about three months last year, specifically on the ACH processing system.
I had previously kind of bought into the cryptocurrency crap about how "bloated" and "draconian" the banking system in the US was, and that's an easy narrative to fall into...the ACH standard is 800+ pages long! Surely us genius software engineers can do better than all these dumb financial regulators.
But as I read through the standard (I'll admit I mostly skimmed, 800 pages of dry financial text isn't exactly exhilarating stuff), I learned that, actually, most of these rules are actually pretty reasonable. It turns out that sending money between people is actually a pretty complicated thing, with tons of edge cases that you have to consider (e.g. How do you deal with fraudulent transactions? How do you deal with situations where you send money to a dozen accounts but one of the account numbers is wrong? Which transactions need to be reversible? etc.).
Definitely having a "why" attached to every single regulation could be helpful. I'm not going to claim that every regulation associated with finance is (still) necessary, but it's rarely as cut and dry as it initially seems.
What I would like for law (which regulations are a type of) is for it to be stored in a public git repository. I want to be able to access that to see who drafted a law, when it was merged into ratified/voted law (and who voted it in), when it was repealed, and so on.
I understand the appeal certainly, but unfortunately in practice it is real case of sausage making. Where at best the reason for clause X,Y, or Z was 'so it would get passed even though it is utterly irrelevant' at best or at worst 'cynically exploiting a moral panic or corruption'.
It's called a history book, and the problem is that a lot of the people who yell about removing "red tape" have read those history books and want to do the things the red tape was literally created to prevent, which is usually lie to someone to make money, and then millions of Americans who think reading history books is woke get very very upset that they can't give their money to companies that need to change the law to be allowed to lie.
Look at crypto. That's literally a system with very little """red tape""" and it's nothing more than a breeding ground for fraudulent investments because the company that promises 10% but literally cannot deliver will always beat out the companies that promise 4% but can mostly safely deliver that. If there's no punishment for lying, honest companies are at a disadvantage, because a market is not a transparent system, you cannot know the internal workings of a company that isn't required to make that info public.
It seems analogous to someone new coming into software development and wondering why their small apps suddenly needs a builder server, docker, kubernetes, airflow, jira, etc... They might have a valid argument but it isn't based on experience.
The article quotes how Nasdaq now have diversity requirements on board members. That's the sort of thing disconnected from business that would push even honest companies away from these larger exchanges.
