SPECULATION AND ITS HARMS: CURRENT SCENARIO.

Speculation: the act of assessing items imprecisely, underestimating or overestimating the item in question; this is my definition of the term. In this post, I decided to tackle the subject by correlating data from four jurisdictions — Brazil, the United States of America, the United Kingdom, and Canada.

With regard to Brazil, the country lacks an explicit anti-speculation policy and instead relies on regulatory bodies that aim to curb practices considered abusive.

Meanwhile, the United States employs a concentrated approach with conduct and transparency regulations. In the USA, the SEC (Securities and Exchange Commission) prohibits price manipulation and requires the disclosure of positions that are significant in stock options and futures.

The United Kingdom regulates speculation through the FCA (Financial Conduct Authority) using emergency powers. Heavy fines can be imposed, and market bans are options included in the Market Abuse Regulation, among other authorities.

In Canada, a combination of federal and provincial rules is used to restrain this abusive practice, and it is important to note that the Canadian Investment Regulatory Organization supervises all brokerages, forbidding uncovered short selling.

These are just a few points to consider regarding the countries chosen for analysis on this topic. What truly matters is that, to date, there is no globally accepted metric to measure the basic speculation indicator; however, a commonly used indicator in the stock market is the Speculative Volume Ratio.

Therefore, speculation is not an officially consolidated measure, so it is necessary to rely on Annual Volume over Market Capitalization and academic studies that segment extremely short-term trades. Generally, it can be understood that in these four jurisdictions, between 45% and 75% of trading volume may be attributed to predominantly speculative operations. Given the lack of standardization, this range should be viewed as an approximate reference.

It is concluded, then, that because no globally accepted mathematical instrument exists to measure the Speculation Index in the stock market, there is a current demand to establish methods and mechanisms for paying the real price at the time of buying or selling in the stock market—something that will be addressed here on the blog in the future, in a more practical manner, to make the investor’s life easier.