Comment Text:
I wanted to comment on the proposed rule that elections could be the subject of futures contracts on the commodities exchanges. If this is the place for that, skip to the end.
On the issue of delivery. As I understand it, the public benefit of the futures market is not simply to open a gambling concession, but to enable producers of commodities to obtain financing of their goods by pre-selling them on a futures exchange. Then, the farmer, or manufacturer can use that money to produce the commodity, and prepare for the future. The farmer takes the risk that they will be unable to produce the commodity, and the buyer takes the risk that the price will drop.
I see no reason for the commodities market to exist simply as a gambling mecca for exotic wagers. When there is no actual delivery of a commodity, there is no purpose for the government to sanction the transaction on this market. Betting should be relegated to and regulated with casinos, and general risk management (credit default swaps) should be relegated and regulated as insurance contracts.
The careless nature of the trading community is demonstrated by their cavalier attitude toward election results. Whereas Jimmy the Greek may have been right at home taking bets on the election results, Our financial markets have no business seeking to dictate to the voters how the results can come out, and that is certainly how this would end. Someone taking a long position on a dark horse would be seeking to mitigate his position by eliminating the opposition, either by muck-raking, buying out the opposition, or other more nefarious deeds.
Politics is already vicious enough without the added financial pressure of the wagering elite, and there is no value to the public in giving this the elevated status of a regulated futures contract.
