[assaflavie]

Say index funds become illegal, just for the sake of argument. Aren't they replaceable by an algorithm - trading software that balances a portfolio that copies an index per investor? It's less efficient, of course, but it's essentially the same thing. You get millions of tiny, cross-sector owners instead of few big index funds. So in that sense the argument in favor of banning index funds is really pointless. They're just one implementation of a strategy that investors could follow on their own, just less efficiently. Essentially, banning them is just a way of enriching brokers because of the expected rise in transaction fees.