The American Feed Industry Association has urged the U.S. Commodity Futures Trading Commission to implement a proposal that would uniformly enforce speculative position limits, enhance transparency, and improve the regulation of all individuals who trade certain energy commodities. In formal comments submitted to the agency in response to a Notice of Proposed Rulemaking in the Federal Register on January 26, 2010, the AFIA characterized the CFTC proposal as a “very positive step forward for the specified energy contracts.”
For nearly two years, AFIA has studied the issues surrounding the highly speculative trading of energy and agricultural commodities by certain entities. Many of these speculative traders are large Wall Street banks and take an unusually large number of positions within markets for certain commodities, causing highly volatile price swings when they enter and exit, according to AFIA. The organization made a number of recommendations to the CFTC in the summer of 2008 regarding possible ways to rein in excessively risky trading behavior in agricultural commodities, and the CFTC embraced some of those recommendations.
“AFIA and the feed industry understand the value and need for speculators and for the speculative role in efficient markets,” said Joel G. Newman, AFIA president and CEO, “but we want to make sure large speculators don’t consolidate and abnormally affect the market. No one speculator or group of speculators should be able to control a large percent of any market.”
He added, “We not only support the new framework for speculative position limits. We also believe it should be applied to ag commodities in a similar manner, as well as to Wall Street bank index funds.”
