Finally, the Government Will Consider Speculative Limits: Commentary by Tom Waterman  of Oilintel.com

New York, NY - I suppose it took the financial meltdown and a stubbornly slow recovery to finally convince lawmakers that it might be time to close down the casinos.
Well, not exactly close them down, but certainly limit the influence of hedge funds and investment banks that have no or very little holdings in the physical world of oil and gas. The CFTC does have speculative limits for corn and wheat (although those should be reviewed as well).
And it's about time.
Commodity Futures and Trading Chairman Gary Gensler said in a statement released on Tuesday that his agency "will be conducting a series of hearings during the months of July and August. This effort will seek input from the public (((150))) consumers, businesses and market participants (((150))) to determine how the agency should use all of its existing authorities to accomplish its mission.
"Our first hearing will focus on whether federal speculative limits should be set by the CFTC to all commodities of finite supply, in particular energy commodities, such as crude oil, heating oil, natural gas, gasoline and other energy products. This will include a careful review of the appropriateness of exemptions from these limits for various types of market participants."
After about 15 years of a strictly "hands-off" approach to financial instruments, the damage done by Wall Street in mortgage securities and commodities is about to kill the goose that laid the golden egg. At least for the huge hedge funds and investment banks that "play" in the commodities markets.
I have been talking about this for years, and I remain cautious about just how tough the CFTC will get, but at least it will be a start.
"My firm belief is that we must aggressively use all existing authorities to ensure market integrity," Gensler said.
He added: "The Commodity Exchange Act states that the CFTC shall impose limits on trading and positions as necessary to eliminate, diminish or prevent the undue burdens on interstate commerce that may result from excessive speculation. The CFTC currently sets and ensures adherence to position limits with respect to certain agriculture products. This is not the case for energy markets. For energy commodities, futures exchanges set position limits and accountability levels to protect against manipulation and congestion. The exchanges are not required to set and enforce position limits to prevent the burdens of excessive speculation."
Additionally, Gensler pointed out ways in which the CFTC will improve transparency.
"I would like to take this opportunity to announce improvements in the transparency of market data that the Commission will be implementing in the near term. Specifically, we will be making enhancements to our weekly Commitments of Traders (COT) report. In addition, the Commission, through our special call authority, will continue to collect and report data from swaps dealers and index investors.

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