CFTC Delays Commodity Speculation Restrictions

20 Dec

The Commodity Futures Trading Commission (CFTC) will delay a vote on reforms to curb what some consider rampant investor speculation in the commodities markets.   The CFTC has run into opposition from those seeking swifter and stronger action from the regulator, as well as those who fear the CFTC is moving too fast and going too far.

“I think its just appropriate to let this one ripen a bit more,” said CFTC Chairman Gary Gensler of the proposed reforms, which would apply position limits across the commodity futures and swaps markets.  Sources say the Chairman did not have enough votes to issue the proposal.

High market speculation has been criticized for increasing volatility and driving up prices of oil and grain to record highs in 2008.  In the interim, Chairman Gensler and the CFTC will establish position “points” which, once breached, would prompt a CFTC review and a vote to potential force traders to reduce positions.

The postponement of this reform reflects the difficulties regulators are experiencing in implementing the Dodd-Frank bill, the largest financial regulatory overhaul since the Great Depression. Many commodities traders are unhappy with the ambiguous signals they are receiving and calling for more clarity from the CFTC.

However, Republicans lawmakers in control of the House financial oversight committees have stressed the dangers of hasty reforms done incorrectly.  They fear that over-regulation could “could damage America’s economic engine” and have encouraged the CFTC to “put on the brakes.”  Read more…

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Posted by on December 20, 2010 in Commodities, Policy


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