With the globalization of derivative markets and the global access provided by t

Question

With the globalization of derivative markets and the global access provided by the World Wide Web, what regulatory issues/problems do you believe exist when trading on the Internet? How would you resolve those issues?I need an answer that is different from the one use on this site!An example of the answer in this site is quote below:

"With the globalization of derivative markets and the global access provided by the World Wide Web, what regulatory issues/problems do you believe exist when trading on the Internet? How would you resolve those issues?I need an answer that is different from the one use on this site! one of the example answer on this site is qoute below :

"A derivative is a financial instrument, the value of which is depending the value of the underlying. The underlying can be an asset or it can be anything like you can create a derivative contract on prediction of rain, volcano eruption, and political win or virtually on anything. Sometime it looks like a gambling tool based on the underlying. But derivative has a life span therefore it expires on its expiration date set at the beginning of the contract.

Derivatives can be custom made or exchange traded. Customized derivatives are available "Over The Counter" (OTC). It is called forward contract and an agreement between two parties at a mutually agreed terms and condition. It has a distinct winner (call long) and loser (called shot).

The trading of forward contract over internet has multiple disadvantages. Those are given below

- Counterparty Risk

- Delivery of Underlying

- Cheating or Deceit of contract

- Clearing and Settlement of Claim

- Constant monitoring of underlying and many more....

In order to address those issues regulator has created exchange traded derivative market. This has addressed most of the underlying issues as mentioned above. It has no physical delivery of contract rather using the concept of mark of market, the changing of derivatives values are marker every end of the day and gainer is compensated from the money available with loser. These contracts are standardized and exchange provided the credit guarantee through clearing houses. Some of the famous future contracts are Swaps. Contingent Claim, Options etc"

Explanation / Answer

With the globalization of derivative markets and the global acess provided by the world wide web, the regulatory issues that might affect the trading over the internet is as follows:

The main issues lie with encryption technology of the electronic platform that is used for trading and to enforce laws on this is somewhat problematic as many loopholes still exist through which threats arise on a constant basis.

You may refer to trading technology journals or even the SEC website to understand and format the answer in your own words.

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