Magazine article Modern Trader

New Sheriff in Town

Magazine article Modern Trader

New Sheriff in Town

Article excerpt

The CFTC is undergoing a changing of the guard with President Obama's nomination of Gary Gensler to serve as its next chairman. In his nomination hearing before the Senate Agriculture Committee on Feb. 25, Gensler said he would focus on preventing excessive speculation. "Position limits must be applied consistently to all markets and trading platforms and exemptions to them must be limited and well-defined," he said.

This represents a change for CFTC leadership that has consistently found, based on numerous Commission studies, that supply and demand factors were the cause of commodity price movement and not excessive speculation. A staff report on this released in September found that the aggregate long positions of commodity index funds in Nymex crude oil actually dropped during the run up to $140.

The International Organization of Securities Commissions' (IOSCO) Technical Committee's Task Force on Commodity Futures Markets published a final report in March, which concluded that fundamentals rather than speculative activity were the plausible explanation for price changes.

IOSCO made a series of recommendations similar to those offered by the CFTC in September to increase transparency and international cooperation, but stopped short of language in several bills that squarely placed blame for energy price increases on speculators.

Gensler also called for a "broad regulatory regime for over-the-counter markets," saying standardized derivatives should be brought to mandated centralized clearing and onto exchanges. …

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