Lisa Simpson
Aug 12,2009
In: Finance

Law to Put a Stop to Speculations in Commodities Trading

speculations

Speculative trading in commodities and energy will be stopped. The futures markets regulator in the US may come up with a law that will stop speculative trading in the futures markets. Public hearings will also be held to seek opinion on this.

Gary Gensler, Chairman, Commodity Futures Trading Commission says comments will be sought from businesses, consumers and market participants on if position limits should be set on contracts of commodity futures.

Gensler says that the first hearing will highlight the need for setting federal limits on commodities that have finite supply. These are heating oil, crude oil, natural gas, and energy products like gasoline. It may be noted that Gensler took over on 26th May.

Reactions will also be sought from various quarters on who would qualify for exemptions. A few lawmakers observe hedge exemption should be given only to those who have plans of buying a commodity. They should not be given to people who want to avoid financial risks.

In 2008, oil prices had reached record levels. Grains contracts too had surged to historic highs. Market players felt funds from investors interfere with the future markets.

CFTC will also alter the weekly Commitments of Traders reports to reflect the swap dealers’ and hedge funds activities. Gensler says that enhancements will also appear but no date was set.

Anti-speculation bills are lying in Congress. These will show the way to CFTC to place position limits on energy and oil futures. It will also spell out the role of hedge funds and energy futures in its reports.

There will be hearings in July and August to determine how the agency should enforce fair trading. Hearing dates have not been announced so far. As of now, CFTC does not put position limits on agricultural contracts.

According to a statement, the agency will seek views on putting position limits across participants and markets. This will include all concerned parties like exchange-traded funds manager. It will also be seen if these limits will improve market efficiency. It will also be seen if CFTC will need additional power to realize the goals.

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