Comment Text:
My primary concern about the derivatives market place is that it's not transparent. This marketplace has become an essential vehicle as a way for investors and institutions to manage the risk of a volatile marketplace. Derivatives are complex and require insight that not only into investment vehicles, but also mathematics/calculus itself. The innovation of using fundamental calculus principles as a way to spread risk was brilliant. However, unregulated this innovation has proven to be incredibly damaging to our country and to individual investors. Our family like most families that own real estate has been significantly damaged by the excessive risk that institutional investors could justify taking, because they could hedge their investments in the derivative marketplace. Even though we as real estate investors had no idea that derivatives were being used as a way to finance real estate within the particular community that we were investing in five years ago. This is the fundamental weakness of the current derivatives marketplace, the lack of transparency. We might have made different investment decisions related to our family's financial future, if at least we would have understood that large financial institutions were making substantial investments in our local community using a commodity as a way to hedge their bets. I am sure that many large institutional investors are not in favor of transparency fearing that their specialized knowledge about a particular investment will become neutralized and of little investment value. This indeed may be true as specialized knowledge does offer significant advantages in any investment marketplace. But society and our country are greatly damaged by not offering to the typical small investor assurance that there is an opportunity for a level playing field. Why would I invest my families hard-earned dollars in any marketplace that potentially could be damaged by a derivatives markets that are opaque. I want to be assured that I can at least get enough information that I can make an informed judgment about the risk and rewards of any investment decision. Without transparency there will not be the opportunity for the knowledge I need to have to protect my family's future.
