Overall, however, the public interest is served both by the prudent use of new financial instruments and by the improvements in risk-measurement and risk-management practices that prudent use requires. Implications for financial regulation As market participants innovate and markets become more efficient and sophisticated, bank regulators and supervisors must ensure that they do not fall behind.
I suspect that the answer is not more rules, for it is difficult to write rules for new products, especially if we do not know what those new products will be, and the rules themselves can breed distortions.