European Union finance ministers agreed on recommendations for stricter oversight of commodity-derivatives trading following concerns that speculation is driving up prices for raw materials.
“We need to be as rigorous and demanding as we are for other financial derivatives,” French Finance Minister Christine Lagarde told reporters today in Godollo, Hungary, at a meeting of EU finance chiefs. “We need mechanisms that produce good regulation. That means position limits so that market makers can’t hold positions that are too big.”
Hungary, which currently holds the six-month rotating EU presidency, intends that the recommendations will form the basis of a coordinated European position at a meeting of Group of 20 finance ministers in Washington next week and of energy officials in Ankara on April 25. France has made the regulation of commodities markets one of the priorities for its presidency of the G-20 in 2011.
The European Commission, the 27-nation EU’s executive arm, will consider proposing legislation to give regulators the power to set limits on the size of positions that traders take on the market, according to a copy of the recommendations obtained by Bloomberg News.
“The transparency of commodity-derivatives markets needs to be improved,” according to the recommendations. This would include extending requirements on traders to report their positions to regulators.
French President Nicolas Sarkozy has stepped up a push for tougher commodities-trading rules this year as surging food and oil prices spur inflation, hurting purchasing power at a time when wage growth has slowed or stagnated in France and other European countries. Crude-oil prices have climbed almost 50 percent in the past year, closing at $126.65 a barrel yesterday in London. The United Nations World Food Price Index has gained 35 percent in the past year.
There has to be ”more transparency” on commodity markets, Luxembourg Finance Minister Luc Frieden said. Policy makers have “to get a better handle on speculation, which contributes to rising prices,” he said.
Hungary will seek formal adoption of the recommendations at a meeting of finance ministers in Brussels on May 17, said Marton Hajdu, a spokesman for Hungary.