HardAssetsInvestor

Written by Brad Zigler  |

March 25, 2010

Fun With The CFTC Today

Details

Wanna have some fun today? Got some hours to spare listening to testimony about the possible imposition of federal position limits on the metals futures—gold, silver, copper, mostly?

Then turn your Web browser to www.cftc.gov. The Commodity Futures Trading Commission is meeting en banc today to hear from market participants and interested parties on whether the regulator should step into the marketplace to impose hard limits on the size of speculators' positions. Presently, the CFTC sets speculative position limits on certain agricultural futures, as enumerated in the Commodity Exchange Act, but defers to the exchanges, as self-regulatory organizations, to curtail excessive speculation in other commodities.

The CFTC hearing was prompted by the recent volatility in metals prices, especially after the introduction of metals-based exchange-traded products, and in response to long-standing contentions that U.S. banks have taken overly large—and some say, manipulative—short positions in precious metals futures.

The commission sent out invites to a wide array of opinion holders to provide testimony in four panels, including individual traders, exchange officials, bank executives, investment advisers and market pundits.

Through today's testimony, the regulatory agency is looking to gain insights into a number of issues, including:

• The role of index and exchange-traded funds in the metals markets and how their activities relate to the consideration of position limits.

• The potential application of universal position limits across all metal derivatives markets and participants, including metals-based exchange-traded funds.

• The impact of position limits on market integrity and efficiency.

• The manner in which position limits might be imposed, i.e., sizing by number of contracts, or proportion of the market and the manner in which exemptions might be granted.

Sound dull? Some of it undoubtedly will be dry. But there's some real good stuff on offer if you want to get some clues - directly from users and providers - how the futures and the underlying cash markets work.

Today's hearing's a short course in real-world metals futures trading, and best of all, it's illustrated with a nifty slide show. Jump on over to www.cftc.gov to learn something.