I tried to get a better idea of exactly how trading on unregulated exchanges and not having to keep detailed activity logs affects spot markets but I'm still confused.
I can see how better oversight is needed when domestic firms are advising and clearing clients' accounts, reporting profit/loss activity to shareholders and maintaining appropriate reserves. That's been the problem with both the C.F.T.C. and the S.E.C. since they were created.
I always understood futures markets to be derivative of spots, not the other way around. So I'm having trouble understanding how a speculator's long position, which is going to be settled before the delivery, or rolled to another contract date at a premium compels producers to artificially inflate prices. There are simpler and more reliable methods of price manipulation available to producers all the way down the production chain.
If using unregulated (by the C.F.T.C.) exchanges creates an unattractive environment for speculators, so be it. The futures game is about risk. Managing risk or capitalizing on assuming risk are the reasons these markets began in the first place. And that's what they are about now. If there really is a divergence in futures/spot value, the shorts will be there ala Soros and the G.B.P.
The Enron loophole as I understand it was an effort to allow public companies to save time and money while allowing for potential abuse within it's own accounting construct. The employees, shareholders, employees and vendors are the ones with the most to gain by closing it. Or they exercise more due diligence before they get involved with these outfits.
The idea of having access to all available markets and instruments is actually very attractive to me as a speculator. If not only to be able to capitalize on more divergence and possible arbitrage windfalls.
The problem is oversight. We employ these agencies to police these companies and they do a terrible job. It all goes back to accountability. If the actions of Enron were noble, there would be no complaint. But in fact they were not and it's not the only bad seed out there. If the commissions we created won't provide adequate regulation, then we need to fix that problem, not limit our opportunities in financial markets.
