Random Walk

WALL ST.

THE collapse of Barings PLC and its rogue trader, Nick Leeson, is the latest “derivative disaster.” It surely won’t be the last. But the lesson is not that we need more financial regulations. On the contrary, the Barings drama demonstrates just how resilient financial markets are when left to their own devices, with de minimis regulation. For every Barings or Orange County there are thousands of success stories—companies and governments better able to weather unforeseen changes in financial conditions because of the protection afforded by derivative hedges. Blowouts are the exception.

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WALL ST.

THE collapse of Barings PLC and its rogue trader, Nick Leeson, is the latest “derivative disaster.” It surely won’t be the last. But the lesson is not that we need more financial regulations. On the contrary, the Barings drama demonstrates just how resilient financial markets are when left to their own devices, with de minimis regulation. For every Barings or Orange County there are thousands of success stories—companies and governments better able to weather unforeseen changes in financial conditions because of the protection afforded by derivative hedges. Blowouts are the exception.