Wednesday Jan 10, 2007

Patents on Financial Instruments

Many investment banks have filed U.S. patents on concepts for financial instruments, these patents have been filed on a vareity of instruments from derivatives to Islamic asset-based investments. Apparently such financial patents are not granted in Europe. It may be clear to some that if an instrument has a great market power, its exclusive availability to one firm can lead to particular instabilities when combined with unavailability to other firms of counter-instrument sor balancing instruments or instruments that "bet" in the same direction. This is a hypothesis worth studying but I think the investigation would be quite subtle and only simple cases can be modeled. Even so, the study of such cases can be illuminating. Economnic efficiency models suppose multiple actors capable of taking parallel actions to make corrections to market swings. Perhaps that story was simply what it was: a simple fiction.
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