The top U.S. commodity regulator will require investors and index funds to disclose more information about their holdings in agricultural markets after farmers and lawmakers alleged speculators had inflated food prices.
The Commodity Futures Trading Commission, in an e-mailed statement, today called for more information from index traders and swaps dealers in the futures markets. The CFTC will grant fewer exemptions to speculative-position limits related to agricultural index trading and plans to provide more detail on trader holdings starting next month.
``We want to make sure that markets are functioning correctly,'' acting Chairman Walt Lukken told reporters in a teleconference today in Washington. ``We want to encourage access to markets, but we want to be sure too much money isn't distorting markets artificially.''
The CFTC, which regulates markets including silver and soybeans and derivatives linked to stock indexes and bonds, is under pressure from Congress to ensure markets aren't being manipulated. The prices of gold, copper, corn and wheat rose to records, gasoline at the pump is the most-expensive ever, and the government forecast an increase for U.S. food costs that will be the biggest since 1989.
Joseph Lieberman, chairman of the Senate Homeland Security and Government Affairs Committee, said May 20 he is considering legislation limiting large institutional investors in commodities markets. The legislation would aim at speculators and other investors who use commodities to hedge against swings in investment instruments such as stocks and the U.S. dollar, Lieberman, a Connecticut independent, said during a hearing.
Billionaire investor George Soros* said today in testimony before the Senate Committee on Commerce, Science and Transportation that record oil prices weighing on the economy are the result of a ``bubble'' caused by speculation from index funds and a tight balance between supply and demand....MORE
Bloomberg had an earlier story that pointed out how, in the case of the cotton market expiring futures did not converge with the spot price, a sign of market shennaigans:
Cotton-Price Swings Disrupt Farmer Sales, Spark Probe (Correct)Unusual swings in cotton prices that disrupted farmer sales in March are now the target of an investigation by the U.S. Commodity Futures Trading Commission, two people familiar with the probe said.
Results of the investigation may be released as soon as June 3, said the people, who asked not to be identified because the probe hasn't been made public. The Washington-based commission, which also is examining potentially improper trading in oil markets, began the cotton inquiry after seeing unusual gaps between futures and spot prices, the people said.
Cotton traded on IntercontinentalExchange Inc.'s ICE Futures U.S. unit rose to a 12-year high on March 5, then fell 26 percent by March 20. Supplies didn't justify the increase, cotton merchants told the commission during an April hearing on the role speculators are playing in rising commodities prices.
``Over the last couple of months, farmers, merchants and shippers have been unable to conduct business as they have for the last 150 years because of the inability to properly hedge their positions,'' Roger K. Haldenby, a vice president for operations at Plains Cotton Growers Inc. in Lubbock, Texas, said in an interview yesterday....MORE
*Here's Bloomberg on Mr. Soros' Senate testimony:
Soros Says Record Oil Prices Result of `Bubble'Billionaire investor George Soros said the record oil prices weighing on the economy are the result of a ``bubble'' caused by speculation from index funds and a tight balance between supply and demand....
``Commodity indexes are not a legitimate asset class,'' he said. He added that raising margin requirements would not affect index trading but could function to limit speculation....MORE