On derivatives

[Parodite]

Financial Reform Explained: What The Heck Are Derivatives?

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When derivatives trade on public exchanges, everyone can see the prices and who’s doing the buying and selling. In addition, everyone involved has to meet minimum capital requirements – demonstrate they have enough money to back up their bets. If it turns out they don’t, the exchange will stand behind both sides of the trade to make sure everybody gets paid.
But there’s another entirely different, hidden way to trade derivatives: one that isn’t open, isn’t regulated and is a way bigger market (some say $600 trillion) than the regulated exchanges that trade commodities. This hidden trading contributed to the near-collapse of our financial system a couple of years back.
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