CFTC debates how to curb commodity speculation

Passed last year, the Dodd-Frank financial bill was crafted in response to the global financial crisis. However, the financial overhaul bill is causing headaches for the Commodity Futures Trading Commission, which is charged with enforcing regulations on speculative commodity investing. The CFTC's members are split largely on partisan lines and are currently debating how best to move forward with the deadline to rein in traders only four days away.Passed last year, the Dodd-Frank financial bill was crafted in response to the global financial crisis. However, the financial overhaul bill is causing headaches for the Commodity Futures Trading Commission, which is charged with enforcing regulations on speculative commodity investing. The CFTC's members are split largely on partisan lines and are currently debating how best to move forward with the deadline to rein in traders only four days away.

The group affirms that a lack of data on the $583 trillion global over-the-counter derivatives market has complicated their attempts to limit speculation; the group's policy decisions will inevitably garner controversy as politicians - including those who serve in the group - have already questioned whether the CFTC is legally able to enforce such rules.The group affirms that a lack of data on the $583 trillion global over-the-counter derivatives market has complicated their attempts to limit speculation; the group's policy decisions will inevitably garner controversy as politicians - including those who serve in the group - have already questioned whether the CFTC is legally able to enforce such rules.

Scott O'Malia, a Republican and commissioner on the council, said that "much of the pressure to immediately implement position limits comes from those who advocate the need for price controls. It is not the role of the commission to control prices."Scott O'Malia, a Republican and commissioner on the council, said that "much of the pressure to immediately implement position limits comes from those who advocate the need for price controls. It is not the role of the commission to control prices."

The CFTC today voted to propose rules that would effectively place limits on the number of contracts a single firm can hold. O'Malia affirmed told reporters that he is "very skeptical" of the measure, but he voted to put it out for public comment. Per terms of Dodd-Frank, the CFTC has until January 17 to curb speculation in the energy and metals markets and until April in agricultural commodities.The CFTC today voted to propose rules that would effectively place limits on the number of contracts a single firm can hold. O'Malia affirmed told reporters that he is "very skeptical" of the measure, but he voted to put it out for public comment. Per terms of Dodd-Frank, the CFTC has until January 17 to curb speculation in the energy and metals markets and until April in agricultural commodities.

The Democratic Chairman of the CTFC, Gary Gensler, disagrees with O'Malia's assertion that he is trying to regulate prices by using his political influence in the group: "The CFTC does not set or regulate prices. Rather, the commission is directed to ensure that commodity markets are fair and orderly to protect the American public."The Democratic Chairman of the CTFC, Gary Gensler, disagrees with O'Malia's assertion that he is trying to regulate prices by using his political influence in the group: "The CFTC does not set or regulate prices. Rather, the commission is directed to ensure that commodity markets are fair and orderly to protect the American public."

Gensler contends that the CTFC needs more information to understand the role that large traders play in the market and how any limits could affect them in the short- and long-term. The tentative plan under discussion would limit traders to 25 percent of deliverable supply in the contract nearest to expiration, followed by an "all-month ceiling of 10 percent of open interest up to the first 25,0000 contracts and 2.5 percent thereafter," Bloomberg reported.Gensler contends that the CTFC needs more information to understand the role that large traders play in the market and how any limits could affect them in the short- and long-term. The tentative plan under discussion would limit traders to 25 percent of deliverable supply in the contract nearest to expiration, followed by an "all-month ceiling of 10 percent of open interest up to the first 25,0000 contracts and 2.5 percent thereafter," Bloomberg reported.

Commodities notched large gains in 2010 and many analysts accused speculators of contributing to the surge in prices; speculators were also heavily blamed for oil's record rise to $147.27 a barrel in 2008. Commodities notched large gains in 2010 and many analysts accused speculators of contributing to the surge in prices; speculators were also heavily blamed for oil's record rise to $147.27 a barrel in 2008.