Commentaries

Back into the mists of time with the CFTC

July 29, 2009

  This is not the first time that the CFTC has considered the issue of “excessive speculation” and position limits. 
   In the wake of the Hunt Brothers silver scandal, Congress directed the Commission to submit a report on the events in the silver market (see timeline below, reproduced from the CFTC website). 
   The CFTC also considered the broader question of whether “unchecked speculation” could pose a danger to markets.  On that occassion the Commission concluded: 
 
“It appears that the capacity of any contract market to absorb the establishment and liquidation of large speculative positions in an orderly manner is related to the relative size of such positions, i.e., the capacity of the market is not unlimited. Recent events in the silver market would support a finding that the capacity of a liquid futures market to absorb large speculative positions is not unlimited, notwithstanding mitigating characteristics of the underlying cash market.” 

CFTC review process – thinking about the eventual outcome

July 29, 2009

Several people have asked what I think will be the eventual outcome of the US Commodity Futures Trading Commission (CFTC)’s review of position limits and hedging exemptions in energy futures markets.  My guess is that the review will result in only fairly minor changes.

CFTC prepares to recant speculators’ influence

July 29, 2009

johnkempcrop– John Kemp is a Reuters columnist. The views expressed are his own –

from John Kemp:

CFTC needs to provide more detail ….

June 2, 2009

The problem is that no one knows what Gensler means about using "aggregated position limits" to curb excessive speculation. 
 
At the moment the CFTC gets NYMEX data (compulsorily) and ICE data (on a "voluntary" basis).  It wants to obtain information on OTC positions as well, but would need additional legislative authority and systems to achieve it. 
 
The real question is what does CFTC mean by "aggregated" positions and "limits" on them: 
 
(1) Does aggregation stop at NYMEX+ICE, or will it extend to NYMEX+ICE+OTC?  Is CFTC prepared to include OTC contracts which are similar, but not identical, to exchange contracts (in terms of the deliverable commodity) and therefore exert an influence on exchange prices? 
 
(2) What does it mean by limits?  Market participants already routinely exceed the soft non-binding "position accountability levels" on NYMEX alone.  Adding in other positions on ICE and OTC will not make any difference, UNLESS the CFTC intends to harden enforcement of the non-binding accountability levels.  Is the Commission preparing to harden the limits and make them more binding? 
 
Gensler's comments do not take the discussion forward unless the Commission provides some more detail on what it means.

from John Kemp:

CFTC’s Gensler calls for “aggregated position limits” to curb excessive speculation

June 2, 2009

15:30 02Jun2009 RTRS-CFTC CHAIRMAN GENSLER BACKS U.S. REGULATION OF OTC DERIVATIVES MARKET, AGGREGATED POSITION LIMITS