Proposed commods regs could boost volatility -CME

July 14, 2009

CME   NEW YORK, July 13 (Reuters) – Rules proposed by the U.S. Commodities Futures Trading Commission to limit speculation in commodities markets could boost volatility, the executive chairman of exchange giant CME Group Inc said on Monday.
   “The less participants you have in the marketplace the greater the bid/offer spread is going to be,” Terry Duffy said in an interview with Reuters TV.
   “I will tell them (regulators) how to increase volatility in the marketplace and that is to limit the amount of participants, and that’s exactly what they’re calling for.”
   The CME, known for its agricultural and financial derivatives products offered on the Chicago Mercantile Exchange, acquired crude oil and metals futures trading business of the New York Mercantile Exchange and its COMEX metals division in August 2008, making it the largest U.S. commodities exchange.
   The U.S. government wants to boost oversight of commodity markets by increasing regulation of over-the-counter derivatives, clamping down on excessive speculation and expanding the power of the CFTC.
   Public hearings are tentatively scheduled for the last week of July and the first week of August on proposals for the multi-market position limits.
   Duffy said placing limits on the size of commodities positions could also drive some investors overseas.
   “The bottom line is that there are alternatives to the regulated platform,” said Duffy.
   “They can go to London, they can go to Dubai, they can go to other places around the world to get exposure to these commodity prices and they’re going to do it.”
   Speculation has been blamed by some analysts for wild swings in commodities prices in recent months as well as for spikes seen last year, such as oil’s surge to record highs near $150 a barrel last July. (Reporting by Jonathan Spicer; writing by Matthew Robinson; Editing by Walter Bagley)
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Monday, 13 July 2009 23:19:05RTRS [nN13206499] {C}ENDS

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