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Market's Evils--Some of Which Have Been Around Since '29--Must Be Corrected Now

April 24, 1988

Martin Mayer's April 17 Viewpoints column, "Greasing the Skids for the Next Crash," on stock market abuses was excellent. Before Congress makes any other changes in the stock market, the evils that we thought were prohibited after 1929--selling short in a declining market, brokers trading for their own accounts before taking care of their customers' accounts, sidestepping margin limits and so forth--must first be addressed.

In addition to the problems described by Mayer, one more old-fashioned abuse is still with us--bucket shops. Bucket shops were places where "investors" could bet on future stock prices without actually buying or selling securities. I thought bucket shops were made illegal long ago. However, I have trouble distinguishing betting on future stock prices from "investing" in stock index futures.

Stock index futures are traded without any actual stocks being bought or sold. Unlike commodity futures, there are no underlying tangible goods. If buyers hold wheat or gold futures beyond the maturity dates, they receive deliveries of wheat or gold. If the buyers hold stock index futures beyond the maturity dates, what do they get--beyond the payoff of their bets?

DAVID E. ROSS

Agoura

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