WASHINGTON, D.C., September 7, 2011 ‘ A national coalition of groups representing commodity-dependent businesses and consumers has criticized a recent Federal Trade Commission (FTC) Staff Report on crude oil and gasoline prices for failing to adequately examine the role of excessive speculation.
‘The [FTC] staff did not draw conclusions on the role of excessive financial speculation in the energy markets based on its own analysis of available market data,” the Coalition in its letter to the Commission. ‘Rather, the staff relied on an extremely limited sampling of available academic literature,” they said.
The coalition members included with their letter a list of more than 75 recent studies, reports and analyses that raise concerns about the potentially harmful effects of excessive speculation on market stability and boom/bust cycles in commodities. Only a handful of those studies were cited by the FTC Staff Report.
The letter urged the FTC to revisit the issue in a more comprehensive manner and to consult with futures regulators, relevant committees in Congress and businesses that hedge commodity price risks.
A growing number of businesses and consumer groups have in recent years become concerned with the amount of financial speculation flowing into energy and agricultural derivatives markets. They feel that the original purpose of these markets ‘ as a price discovery and hedging tool ‘ is being undermined.
Dozens of recent studies into the subject have pointed to opacity, excessive speculation and disruptive trading in commodity futures and swaps markets as a driving factor in radical and unwarranted price swings. This has led to call for reform of commodities trading, including across-the-board transparency and limits on speculation. Futures regulators are currently writing a final rule on position limits for consideration later this month.
Last Year’s Wall Street Reform law included such reforms. However many of the rulemakings to implement that law have been delayed, including speculative position limits. Members of the Commodity Markets Oversight Coalition, which wrote this week’s letter to the FTC, have been leading supporters of such limits.
Link to the Coalition Letter to FTC Commissioners:
The Commodity Markets Oversight Coalition (CMOC) is an independent, non-partisan and non-profit alliance of groups that represent commodity-dependent industries, businesses and end-users, including American consumers, that rely on commodity derivatives markets as a hedging and price discovery tool. The CMOC advocates in favor of government policies that promote stability and confidence in the commodities markets, that seek to prevent fraud, manipulation and excessive speculation, and that preserve the interests of bona fide hedgers and consumers.