Living in Beijing underscores the importance of change and adaptation. There is a noticeable drop in the amount of processed sugar in foods, reflecting local (and healthier) tastes. Virtually every restaurant delivers, including McDonald’s (which raises the question, if you’re going to order delivery, why McDonald’s?). And, most particularly, I recently joined the thousands of Chinese students and pensioners who weave in-and-around traffic on electric battery-powered mopeds. It is a great way to get around the city (even if some of the pensioners have a tendency to cut you off).
The same focus on change arises in the capital markets. A person who owns or sells a security is presumed to own or sell the financial risk of that security. By selling shares, for example, the costs and benefits of those shares—the rise or fall in share price—are understood to run with the instruments being sold. Changes in the capital markets, however, have begun to call that presumption into question. Increasingly, market participants can use new trading methods to sell instruments to one person, but transfer their financial risk to someone else. The result is greater complexity and new challenges to regulation and the regulators.
To what extent should the securities laws adjust to reflect those changes? The answer largely turns on the question of “identity.” Moving from modern-day Chinato to ancient Greece, the Greek historian Plutarch identified the question in his story of Theseus, the mythical king of Athens. For many, Theseus is known for slaying the Minotaur, a half-man, half-bull monster that devoured children sent to Cretein tribute to King Minos. According to Plutarch, after Theseus returned to Greece, his boat remained in Athensharbor for centuries as a memorial to his bravery.