Oil Speculation Curbs Would Aid Market Diversity, Gensler Says
The U.S. Commodity Futures Trading Commission’s authority to impose curbs on speculative trading is designed to prevent small groups from dominating markets in oil, gold, natural gas and other commodities, Gary Gensler, CFTC chairman, said.
“At the core of our obligations is promoting market integrity, which the agency has historically interpreted to include ensuring that markets do not become too concentrated,” Gensler said in a speech prepared for the Sandler O’Neill Global Exchange and Brokerage Conference held in New York.
The agency’s January proposal for so-called position limits is among the most contentious aspects of the Dodd-Frank Act and spurred about 12,000 public comments from supporters including Delta Air Lines Inc. (DAL) as well as from opponents including Morgan Stanley (MS) and Cargill Inc. The CFTC has faced pressure from Democrats in Congress who have urged the agency to quickly implement the trading curbs, citing the increase in commodity prices.
“Congress gave the CFTC the power to rein in excessive oil speculation and the CFTC should use it,” Senator Maria Cantwell, a Washington Democrat, said on May 24. The agency has yet to schedule a meeting to finalize the proposal, which was approved on a 4-1 vote.
Swap dealers and other financial money managers represent a majority of trading in futures markets, Gensler said. About 12 percent of gross long and about 20 percent of gross short positions in the market for West Texas Intermediate crude were held by producers, merchants, processors and other uses of the commodity, Gensler said, citing CFTC data as of May 31.
The CFTC plans later this month to publish historical data on changes in positions in the futures market, he said. As much as 80 percent of volume in some futures markets is conducted by day trading or a type of trade known as a calendar spread, he said.
“This means that only about 20 percent or less of the trading is done by traders who bring a longer-term perspective to the market on the price of the commodity,” Gensler said.
To contact the reporter on this story: Silla Brush in Washington at sbrush@bloomberg.net.
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net
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