Impact of U.S Financial Market Deregulation on Commodity Derivatives Market: An Overview

Abstract

With due credit to the globalized interlinked economy, the international linkages, information transmission, and the spillover effect from one futures market to other markets across the world is well researched and documented. Especially several studies on equity, currency, and commodity markets have documented the dominance of U.S markets in innovation and information dissemination to the rest to the world. The information of price, market return and volatility that is prevailing in U.S market is no more a domestic issue since it gets incorporated into international commodity futures markets immediately without sparing any lead-lag relationship. As US is the birthplace of several financial market and regulatory innovations, the entire world is looking at it for taking corrective measures. To conclude, it is not the failure of the derivatives market but it is the failure of the regulatory mechanism that have created turmoil in the market. The policy makers should understand that it is in their hands to design a regulatory architecture taking into account the developments and experiences during the first few years of the market - good and bad - and literally shape the financial and commodity market system that forms the foundation for the future of futures market.