[brc]

I agree with most of your points except for 3. As long as the income from the transactions are conducted legally, then you'll get the tax money for them. If you try and tax each transaction, you'll just move the transactions offshore. Communications technology means that a derivative market can be conducted anywhere.

I think what you want is for derivatives to not have the chance to bring down entire sectors of the economy. That's fine, and your point in (2) would acheive this. There is also a case to be made for larger capital and margin requirements for trading firms above a certain size - ie, anyone who trades over X,000 contracts per year.

Derivatives traders can fail as much as they want as long as the failure doesn't threaten stability. It's when they bet too large, and use depositors money, that the problems start. Introducing capital and margin requirements keeps the size of the bets down and isolating trading from banking keeps them from using depositors money.