Commodities Speculators Get a Break in (proposed) New Rule - thank you CFTC

Congress told federal regulators to write rules that would ensure that Dodd-Frank does what it’s supposed to do, which includes protecting consumers. But the Commodity Futures Trading Commission has proposed rules that critics say might actually encourage speculation in the commodities markets, rather than reduce it.

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“Despite a clear directive from Congress to rein in excessive speculation, regulators still are listening too much to Wall Street and not acting quickly enough to protect American consumers,” Mr. Nelson (Sen. Bill Nelson, D_Bill USA) said last week.

But Michael Greenberger, a professor at the University of Maryland Law School, says that a majority of academic studies on this issue — from Texas A&M, Rice and Stanford — demonstrate the ill effects of speculation on energy and food prices.

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“Dodd-Frank was intended to include these commodity index swaps with strict limitations on the participation of speculators in the commodities staples futures markets,” Mr. Greenberger says. But the response from the C.F.T.C. “is a horrifically weak rule.”
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Financial players including banks like Goldman Sachs and Barclays have taken over food markets, says the World Development Movement’s report, with the total assets of financial speculators in these markets nearly doubling from $65 billion to $126 billion in the last five years. Not a single penny of this has been invested in agriculture.

The report, ‘Broken Markets’, finds that:

• Financial speculators now hold over 60 per cent of some markets for basic foods, compared to just 12 per cent 15 years ago

• The total amount of money speculated on commodities is 20 times more than the total amount of aid money given globally for agriculture
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