‘Speculators’ challenged

Wednesday, June 11

Amid growing public disquiet about the rising cost of food and fuel, US regulators have come under increasing pressure to seriously question the role of investor activity in driving up commodity prices.

Yesterday, the Commodity Futures and Trading Commission (CFTC) convened the inaugural meeting of its new Energy Markets Advisory Committee. One key proposal has been to bolster information sharing with the UK Financial Services Authority, with which it held talks on Tuesday. 

Another recent initiative - that of publicised investigations - represents a shift in culture for a regulator that has traditionally conducted enforcement investigations on the quiet.  The CFTC has decided to be open about investigations to demonstrate that it will identify and punish wrong-doers:

• Last December, the CFTC commenced an investigation into whether market participants are involved in using physical storage and distribution capabilities in concert with derivative trading in order to create market squeezes for crude oil.

• It has an ongoing investigation into whether or not abusive trading caused unusual price dynamics in the US cotton futures market earlier in the year.

However, in May, the CFTC announced that it had found no evidence of market manipulation in the silver market following a thorough investigation of data concerning the US silver futures market between 2005-07.