CFTC Considering Limiting Commodities Speculation
July 7th, 2009 | 
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The Commodities Futures Trading Commission (CFTC) Chairman Gary Gensler stated that they will seek public comment on whether to set position limits on all commodity futures contracts. According to Reuters: “Our first hearing will focus on whether federal speculative limits should be set by the CFTC to all commodities of finite supply, in particular energy commodities such as crude oil, heating oil, natural gas, gasoline and other energy products,” said Gensler, who took office on May 26.[1]
The CFTC statement said, "The commission will be seeking views on applying position limits consistently across all markets and participants, including index funds and managers of exchange-traded funds; whether such limits would enhance market integrity and efficiency; whether CFTC needs additional authority to fully accomplish these goals; and how the commission should determine appropriate levels for each market."
After oil prices spiked to record highs in 2008, many analysts indicated that speculation on the part of major oil industry traders, hedge funds and Wall Street firms drove energy prices beyond the level that true supply and demand warranted. The CFTC is also considering reporting the oil and energy futures activities of swaps and hedge funds.
I believe that reasonable limits would help ensure that oil prices better reflect the economic realities of the markets, and further market transparency is needed.
[1] Charles Abbott, “CFTC Considering Tighter Controls on Commodity Trading,” Reuters, July 7, 2009.
Posted in Regulatory Reform
