House votes to crack down on institutional oil and agricultural commodities speculators

The U.S. House of Representatives last week passed the Commodity Markets Transparency and Accountability Act of 2008 (CMTAA), which will crack down on institutional speculators and sovereign wealth funds that have helped distort oil and agricultural commodities prices.  Whether the bill, H.R. 6604, will get through the Senate and a House-Senate conference committee before Congress adjourns next week for the elections remains to be seen.  The bill authorizes the Commodity Futures Trading Commission (CFTC), which regulates the futures markets, to require institutional speculators in energy and ag futures markets to produce monthy position reports. The CFTC also will set position limits on the number of contracts institutional speculators and swaps dealers on Wall Street may have in the market at any one time.  Thus, the House bought the recommendations in the Masters and White report on how institutional index fund speculators are distorting the futures markets, not the bureaucratic dodge produced by the CTFC a couple of weeks ago. I blogged about the two reports here and here. It is not clear why the act applies only to energy and agricultural commodities and not the metals and other markets not regulated by the Securities and Exchange Commission.  In addition to expanding the CTFC’s long-time mission of protecting speculators, producers and consumers with appropriate regulations of energy and ag futures markets, the House bill requires the CTFC to produce several reports on how speculators affect pricing in futures markets around the world. Those reports are due over the next two years.  H.R. 6604 looks like a sensible and clean bill. There are no earmarks and only the institutional speculators and their brokers are opposing it. They have been profiting from the chaos they’ve created in the futures markets and don’t want the party to end.

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