CFTC Commissioner Chilton Promises Limits on Speculation
Will CFTC Commissioner Chilton’s proposals lead to regulation this time? (image: businessweek.com)
Upon news that its chief economist will soon resign, the CFTC renewed its promise to impose trading limits on crude oil and other energy futures in an effort to curb rampant speculation, BusinessWeek reported on Sunday. Commissioner Bart Chilton stated that the commission will propose a new rule preventing any one entity—whether it be a hedge fund or an investment bank—from “controlling too much of a given market.” He suggested that such a policy could take effect as early as April.
The CFTC has sworn opposition to commodities speculation before, though it has been unable to push forward regulatory legislation. Since taking the helm of the commission in January of 2009, Chairman Gary Gensler has been a vociferous advocate of the improved oversight of commodity futures markets. When the price of oil reached $147 a barrel in the summer of 2008, many analysts, including Gensler, began blaming speculators for buying long on oil futures, thereby driving up the price of crude. Gensler has argued that the best way to moderate oil prices is to closely monitor the way futures are traded.
Similarly, Chilton argues that whereas a “buy-and-hold” strategy usually stabilizes a stock or bond, it tends to have the opposite effect on commodities; when institutional investors buy too many oil futures, they hamper the ability of the market to adjust swiftly to changes in supply and demand. Thus, Chilton and Gensler’s argument that institutional investors ought to be limited in how many futures they can buy at one time.
Astute readers will recall that when the CFTC first advocated trading limits, legislation was scheduled to go into effect in the fall of 2009. It is thus with an air of modest skepticism that we acknowledge Chilton’s claim, keeping in mind, of course, that establishing new regulations is not as easy as it may sound, and that until all five politically diverse members of the commission agree upon terms for a new policy, we might expect yet another pep talk from Gensler or Chilton before we see the imposition of policy.
CFTC Meets to Discuss Limits on Oil Speculation | HeatingOil.com says: says:
[...] in oil and energy markets was a long time coming, this meeting is only a first step, and actual regulations are still weeks or even months away. The commission will ask for public comments on any preliminary proposal before a final [...]
Inside Source: CFTC Will Enact “Generous” Limits On Energy Trading | HeatingOil.com says: says:
[...] Commissioner Chilton has also been a frequent advocate, and has stated a cogent case that large institutional investor holdings in commodities are by definition destabilizing to the market. Indeed, anti-excessive-speculation rhetoric has come from the very top of this Administration: [...]
Josh Garrett says: says:
Thanks for your thoughts, True. It certainly is frustrating to hear the CFTC and other bureaucrats talking tough about regulating heating oil and other energy product trading for over a year with nothing to show for it. I suppose all we can do for now is hope that action is taken before the next heating season sets in.
True2you says: says:
Empty Promises…. Corporate America has out sourced America the profits have been taken… Wall Street lavish lifestyle will now depend on continual taxing and fleecing the working class…. or what remains of it.