Wednesday, August 31, 2011

Debate Heats Up Over Commodities Holdings

More on the manipulation of Commodities. In conversations here in Naples I have discussed that if prices fluctuate so sharply and affect the general populance that  there will be investigations.
Aivars Lode

A battle is heating up over whether investors in oil and other commodities markets should be required to lift the veil of secrecy that shrouds their trading bets.
The debate has simmered in the three years since oil prices spiked to record highs in 2008, sparking concerns that speculators were driving the move. But it intensified in recent weeks after The Wall Street Journal published confidential regulatory data that identified some of the biggest players in commodities markets, and big chunks of their positions, during that historic rally.
Unlike the stock market, there are no rules mandating public disclosure of commodities positions held by investors.
Industry groups representing traders in the market have opposed releasing any data that would expose the identities and positions of any firm or individual in the commodities markets because they say it would unfairly give away their trading strategies. They have called for a probe into how the information became public.
Others have seized on the data to push for more transparency, including the release of such information on a regular basis.
Tyson Slocum, a member of an advisory committee to the Commodities Futures Trading Commission and director of the energy group at advocacy organization Public Citizen, is leading a push to force commodities investors to publicly disclose the size and nature of their trading positions.
TKence France-Presse/Getty Images
The debate over the role of investors exploded again this year when oil once again topped $100 a barrel and the Obama administration in April launched an inquiry into oil-market speculation. Above, oil pumps in operation near central Los Angeles, Calif, in June.
On Wednesday, Mr. Slocum plans to release a letter to members of Congress, as well as CFTC commissioners, seeking regular disclosure of data.
"We feel that regular disclosure of this level of data serves a crucial role in keeping markets transparent and providing critical information to decision makers and the public," Mr. Slocum said.
His group is pressing the CFTC and lawmakers to make this kind of disclosure mandatory, similar to how the Federal Reserve releases minutes of meetings within a certain time period.
Chilling Effect
Many people who buy and sell securities tied to oil, however, say that releasing the data could be harmful to their trading strategies and could prompt some to reduce their activity, having a potentially chilling effect on the market.
The Futures Industry Association has said that the release of the 2008 data "poses a serious threat" to the confidence of those in the market, who believed they were reporting their positions to regulators privately. The association said it will ask the CFTC to investigate whether any of its rules governing the handling of confidential data have been violated.
A CFTC spokesman declined to comment.
The CFTC collected the data during a "special call" in 2008, when it was attempting to figure out what was causing swings in the price of securities tied to oil. It used the data as the basis for a controversial report that concluded that supply and demand was behind the gyrations, not investors who neither produce nor consume oil on a large scale—a group critics call "speculators."
Rare View
The list contained more than 200 firms and traders, ranging from Goldman Sachs Group Inc. to Yale University to a Danish pension fund, giving a rare view into the murky world of commodities trading.
Sen. Bernie Sanders (I-Vt.), who has distributed the CFTC information, is among lawmakers pushing regulators to limit investments in oil securities by speculators.
Keeping the names private, some argue, leaves the public at a disadvantage.
Amy Myers-Jaffe, a Rice University professor who co-wrote a report questioning the CFTC's methodology for weighing the impact of speculators, said the names of commodity investors should be made public information. "The only people who don't know who's in the commodities market is the public," Ms. Myers-Jaffe said. "I wouldn't hold my deposit in a bank with a giant position in the oil market. It could change on a dime with a shift in geopolitical position," she added
The debate over the role of investors exploded again this year when oil once again topped $100 a barrel and the Obama administration in April launched an inquiry into oil-market speculation.
Oil prices have since fallen again, and settled Tuesday up 1.9%, at $88.90 a barrel. But prices remain a concern for policy makers focused on how to stimulate economic growth, because of they can act as a drag on economic activity.
Write to Ianthe Jeanne Dugan at and Liam Plevin at

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