Make us your home page
Instagram

New rule caps trade in some commodity futures

WASHINGTON — Trading in commodities futures will be capped under a federal rule adopted Tuesday that seeks to clamp down on speculative trades, which some have blamed for driving up food and gas prices in the past year.

The Commodity Futures Trading Commission voted 3-2 to approve the rule, which doesn't take effect until 2012. It was required under the financial regulatory overhaul.

Critics say the cap on futures contracts, which locks in prices, won't curb inflation. Liberals complain that the rule is filled with exemptions that would allow banks and hedge funds to continue speculative trading. Conservatives say too few companies can qualify for exemptions.

Under the rule, airlines, agriculture companies and others are exempt from the cap. Those companies buy futures contracts to guard against sharp price swings. There are also exemptions for companies where payments of royalties or service fees are tied to production of a commodity. That could occur with natural gas, for example, CFTC staff said.

CFTC Commissioner Jill Sommers, a Republican, said the exemptions are narrower than what is required by the overhaul law. That will make it harder and costlier for commercial companies to hedge against price swings.

The curbs are aimed at investment firms and others who trade commodity futures to profit from swings in market prices. Hundreds of millions of dollars in profits for Wall Street banks are at stake.

Under the new rule, the volume of futures contracts that financial investors can trade for 28 commodities will be restricted. The buyer of a futures contract commits to purchase something at a specified date and price. Futures are supposed to reduce price volatility. But financial investors use them to bet on prices, which critics say can magnify price swings.

Michael Masters, chairman of Better Markets, a group advocating restraints on financial speculation, called the new rule "a good first step."

Commodity index funds, investments tied to the value of a basket of commodity futures, were created by big Wall Street firms. They have ballooned in recent years among mutual funds and other big investors, pumping hundreds of billions of dollars into the futures markets. Critics say their in-and-out trading in futures contracts has worsened the boom-and-bust cycles in commodity prices.

Increases in wholesale prices of commodities get passed on to consumers in the form of higher gas prices, costlier airline tickets and more expensive food.

Pope Benedict XVI and Howard Schultz, the CEO of Starbucks, are among the public figures who have recently denounced commodity speculation.

Last week, about 400 economists from 40 countries signed a letter to finance chiefs of the world's leading economies seeking curbs on speculative trading, which they say has driven food prices higher.

Restricted commodities

Federal regulators have capped the volume of futures trading for 28 commodities. They are:

Agriculture: Corn, oats, soybeans, soybean meal, soybean oil, wheat, cotton, hard winter wheat, hard red spring wheat, milk, feeder cattle, lean hogs, live cattle, rice, cocoa, coffee, frozen orange juice concentrate, sugar no. 11, sugar no. 16.

Energy: Natural gas, light sweet crude oil, gasoline, heating oil.

Metals: Copper, gold, silver, palladium, platinum.

New rule caps trade in some commodity futures 10/18/11 [Last modified: Tuesday, October 18, 2011 8:26pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Kidpreneurs — and adults — capitalize on gooey, squishy Slime craze

    Retail

    First it was Play-Doh. Then Gak. There have been dozens of variations for sale of the oozy, gooey, squishable, stretchable kids' toy through the generations.

    Aletheia Venator and Berlyn Perdomo demonstrate the stretchiness of their slime. - Berlyn Perdomo and her friend, Aletheia Venator, both 13, make and sell slime which can be seen on their instagram site @the.real.slimeshadyy [JIM DAMASKE   |   Times]
  2. The last farmer of Florida's prized Zellwood corn is thinking of packing it in

    Consumer

    MOUNT DORA — Hank Scott steps out of his pickup between the long rows and snaps off an ear that grows about bellybutton-high on the forehead-high stalks.

    Hank Scott, co-owner of Long and Scott Farms, shucks an ear of corn on the farm in Mount Dora, Fla., on Wednesday, May 10, 2017. The farm specializes in Scott's Zellwood Triple-Sweet Gourmet Corn. LOREN ELLIOTT   |   Times
  3. Law firm's Russia ties prove nothing about Trump

    Business

    The statement

    "Law firm @POTUS used to show he has no ties to Russia was named Russia Law Firm of the Year for their extensive ties to Russia. Unreal."

    Sen. Chris Murphy, D-Conn., stands during a media availability on Capitol Hill, Monday, June 20, 2016 in Washington. A divided Senate blocked rival election-year plans to curb guns on Monday, eight days after the horror of Orlando's mass shooting intensified pressure on lawmakers to act but knotted them in gridlock anyway — even over restricting firearms for terrorists. (AP Photo/Alex Brandon)
  4. Pasco county lawyer disbarred for taking woman's money

    Real Estate

    NEW PORT RICHEY — The Florida Supreme Court on Thursday disbarred Pasco County attorney and former congressional candidate Constantine Kalogianis.

    The Florida Supreme Court on Thursday disbarred Pasco County attorney and former congressional candidate Constantine Kalogianis. 
[2016 booking photo via Pasco County Sheriff's Office]
  5. Rick Scott signs package of tax breaks

    State Roundup

    TALLAHASSEE — Gov. Rick Scott signed a tax cut package Thursday that — while vastly scaled back from what he wanted — eliminates the so-called "tampon tax" and offers tax holidays for back-to-school shoppers and Floridians preparing for hurricane season.

    Florida Governor Rick Scott signed a tax cut package that will cost state coffers $91.6 million during the upcoming year. [Joe Raedle | Getty Images]