CFTC Proposes Limits On Speculative Trading In Oil, Food Products, Other Commodities

[Purveyor]

Source: Associated Press

WASHINGTON — Federal regulators took a step Thursday to limit speculative trading of oil, food products and other commodities, responding to critics who say that has driven up consumer prices.

The Commodity Futures Trading Commission proposed limiting the volume of futures contracts that financial investors can trade for 28 commodities. The panel voted 4-1 to advance the rule, which opens it to public comment.

The restrictions are aimed at Wall Street firms and others who trade them to profit from swings in market prices. Agricultural companies, airlines and others who use futures trading to hedge against price changes would not be affected.

Lawmakers had proposed establishing limits on speculative trading of commodities as part of the financial overhaul law enacted last summer. But they left the details of the rules to regulators to sort out.

Eight senators — seven Democrats and one Independent — sent the regulatory commission a letter Thursday raising concerns about lobbying efforts by the financial industry aimed at watering down rules. The senators urged regulators to enact rules that place limits all traders other than those with "bona fide hedge positions."

Read more: http://www.therepublic.com/view/story/133291e00f66410cb1f42fbe7977fc24/US--Commodity_Futures/

[BeFree]

1. Just a 100 years late.

[Hubert Flottz]

3. Better late than never.

The GOPers ain't going to like this.

[Terry in Austin]

2. Cue Rod Serling

"Profit from swings in market prices."
...You mean, those bastards buy low and sell high?

And is "bona fide hedging" sorta like "chaste sex"?

Oh yeah, and oil is a "commodity." Right. Show up at the window with enough cash, and God will put more oil in the ground.

:facepalm:

[dmallind]

7. hmmm.

Bona fide hedging is neither an oxymoron nor an unethical practice.

A large part of my company's expenditure is in steel - a commodity that often sees sudden pricing swings. We have to extend pricing for our goods for much longer than steel prices are stable, so by hedging on steel prices (a fairly new possibility believe it or not) we can at last recoup some of our exposure if they rise, because we "win" the bet that they will rise even as we lose on our material spend.

And oil is most certainly a commodity, the definition of which concerns easy fungibility of source of supply and substantial homogeneity of quality, not long term irrevocable absence of limits on supply.

And buying low and selling high is the essence of sound trade while we're at it. Would you sell your labor for only what it cost you to provide it? Labor btw is also a commodity for 99.99% of us (me certainly included)

[safeinOhio]

9. I'm all for users that need

to stabilize cost. However, being able to take delivery should be a prerequisite to large bets.

[Devil_Fish]

11. I agree with that. If you buy a ship load of oil, you better need oil.

[Uncle Joe]

4. Kicked and recommended.

Thanks for the thread, Purveyor.

[Mark Maker]

5. A return to pre 2000 rules would be helpful

and a repeal of the The Commodity Futures Modernization Act of 2000, which allowed investment banks to "play" in the commodities markets and altered the margin requirements to a mere joke, would be an excellent starting point

[dmallind]

6. sounds good to me.

[Lucky Luciano]

8. So, Can a bank buy an airline or small farm

...and engage in bonafide hedging?

[Demeter]

10. kick for hope and joy

[WhiteTara]

12. +1 n/t