The wheels of government turn slowly and the change in administration put the last few months of the previous administration into a holding pattern waiting for the new policy makers to arrive. So may be we should be impressed with the speed at which two new pieces have been put before the House and Senate although I suspect they have been in the making since much earlier last year.
Both bills going before the House are set to force the CFTC ” Commodities Futures Trading Commission to curb the effects of speculative money on commodity prices by imposing tougher limits on the size of positions investors can hold and requiring more disclosure, according to Reuters.
In much the same spirit, President Obama’s nominee to run the CFTC Gary Gensler, has run into opposition to his appointment as senators have claimed he is too de-regulatory orientated. In a letter to one senator, Gensler stated that “excessive speculation” could cause “sudden or unreasonable fluctuations or unwarranted changes in commodity prices” (this has actually happened in recent years). Nothing new there most of us would say, sounds rather like common sense. But it is a far cry from the position the CFTC took a year ago when they stated there was no evidence of a link between speculative money and volatility.
Most consumers would probably welcome a reduction in futures markets volatility and if this can be achieved by greater regulation of the OTC market then so be it. In general terms we are not normally supporters of greater government regulation but we have seen first hand the damage metal price volatility can cause processors and consumers of metals. So if a light regulatory hand can calm that volatility by creating more visibility and managing speculative positions we would welcome greater CFTC involvement. The question remains if a democratic administration will be able to leave it at a light hand, only time will tell.