But there are plenty of examples where regulation could be counter-productive: a permanent ban on short-selling, for instance, would make markets more volatile.

ECONOMIST: The world economy

Last year, as the subprime market began its collapse, the President's Working Group, which includes the Treasury Department, the Federal Reserve, the SEC and the Commodities Futures Trading Commission, recommended against tighter oversight of the over-the-counter market, in the context of vetoing tighter regulation of hedge funds, saying the industry can self-police.

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The manner in which these funds operate must be clearly understood or else any further regulation will be at best ineffective or at worst counter-productive.

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Self-regulation, social norms, and public pressure can also help counter many problems without resorting to major changes in liability norms.

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Existing US law largely excludes regulation of such instruments - referred to as "over-the-counter" because they are privately traded.

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Big exchanges face threats from off-exchange trading and, in Europe, regulation coming into force by 2007 will blur the distinctions between over-the-counter and on-exchange trading.

ECONOMIST: London Stock Exchange