What is the cause of the financial breakdown we have seen? One factor could be new markets for financial products that are not fully understood, and which are traded privately between parties with no open exchange or market involved.
All sorts of products can be derived and synthesized, which is inherently good if allowed to be grown well. It also makes possible customer customisation.
Examples: many kinds of futures, collateralised-debt obligations, interest-rate swaps, credit-default swaps, ….
Regulatory control should be considered involving centralised clearing and infrastructure, some standardisation, measuring volume of transactions and types of risk. This fosters transparency and accountability, makes parties interests visible, letting the public know what is going on.
Innovative technologies and products should be allowed in principle, but large risks of consequence to society should be monitored by regulators. An example: How do we treat dark pools?
(Wikipedia:Dark pools of liquidity (also dark pools or dark liquidity) are crossing networks that provide liquidity that is not displayed on order books. This is useful for traders who wish to move large numbers ofshares without revealing themselves to the open market. Dark liquidity pools offer institutional investors many of the efficiencies associated with trading on the exchanges’ public limit order books but without showing their hands to others. Dark liquidity pools avoid this risk because neither the price nor the identity of the trading company is displayed.)
International cooperation is a must!