Minyanville – NEWS & VIEWS-Article

It’s not as if the desire for money is breaking news. German philosopher Arthur Schopenhauer, who died in 1860, said, “Wealth is like seawater; the more we drink, the thirstier we become.”

“SBUX: Hot water and filtered dirt for $4.50.”

In a relatively short period of time, barely more than a decade, Indian derivatives have burst on to the international scene. They offer an interesting array of trading opportunities. Unfortunately it is still awkward for international entities to gain access to Indian financial derivates and impossible for them to gain access to physical commodity products. Recently, the FMC has indicated its willingness to allow international futures brokers to broker only domestically originated transactions in India. While we on the outside may be impatient to be invited to participate, the Indian authorities have many considerations to balance.

The Reserve Bank of India (RBI) said on Thursday it would launch an electronic reporting platform for rupee derivative products such as swaps from Aug. 30, a move analysts said would bring more transparency to a fledgling market.

Within 30 minutes of a deal, banks and primary dealers will have to report the trade on the platform, which will be managed by the Clearing Corp of India.

Banks and dealers will have to provide all historical trade information by Sept. 15, but they do not have to give details of their clients, the RBI said.

Traders say a reporting platform for interest rate swaps is a precursor to move derivative trading online.

Quantitative investment analysis is one of many indirect outgrowths of the Logical Positivist School of philosophy. Another more direct outgrowth of Logical Positivism is the psychological school of Operationalism. B. F. Skinner stated this approach to research more clearly than I have ever heard an investment quant state it. In the 1945 Psychological Review, Skinner wrote, “Operationalism may be defined as talking about (1) one’s observations, (2) the manipulative and calculational procedures involved in making them, (3) the logical and mathematical steps that intervene between earlier and later statements, and (4) nothing else.”

The Logical Positivists wanted to eliminate nonsense from language by restricting what could be done with it. As such, Logical Positivism is at the core of some of the most powerful and successful ideas in human history.

At the end of the day, we would likely all agree – regardless of income – that our standard of living is pretty darn spectacular. Even the “poor” in this country have air conditioned apartments or homes, electricity and plumbing, a television, and often a car. With few exceptions they have a job and with zero exceptions an opportunity. The dramatic increases in standards of living will be in other countries and sadly those “gains” are often viewed as our “losses.” As a trader, nothing is ever good or bad, although I have a hard time not viewing that as good, dare I say great, for a few billion people. Rather, things are simply and always – different. Different makes good debates and even better trades.

Nothing within the current marketplace allows for the hedging of liquidity risk and that is the problem at the moment. Only the central banks can solve this puzzle with their own liquidity infusions and perhaps a series of rate cuts. The markets stand by with apprehension.