Globalization of commodity markets and the unprecedented run-up in energy and commodity prices prompted the Commodity Futures Trading Commission to announce last week it has formed an interagency task force to take a hard look at just how futures markets are being impacted by current trading practices. That task force is "examining investor practices, fundamental supply and demand factors, and the role of speculators and index traders," Walter Lukken, acting CFTC chairman testified Monday at a hearing held by the House Energy and Commerce Committee.
On Tuesday, Lukken will appear before the House Agriculture Committee during a hearing on trading issues in energy markets. Immediately following the hearing, the committee will go into a business session to consider H.R. 6334, the Increasing Transparency and Accountability in Oil Prices Act of 2008. Rep. Bob Etheridge, D-N.C., introduced the bill, which seeks additional resources and powers for the Commodity Futures Trading Commission to prevent price distortion in the futures markets. Etheridge chairs the subcommittee on general farm commodities and risk management, which has jurisdiction over the CFTC.
A statement from his office explained the new bill "will take three steps to ensure that energy prices are not being artificially increased by unfair market practices." First it will give the CFTC more resources to weed out potential manipulation and excessive speculation. Second, it will close the so-called "London-loophole" by giving the CFTC more authority over trading of U.S. energy commodities on overseas markets which are currently not regulated by a U.S. entity. Finally, the bill will require more disclosure and transparency from investors like index funds and swap dealers so the public can see, in the aggregate, how much these traders influence energy markets.
The hearing will be online at: www.agriculture.house.gov beginning at 2:30 p.m. EDT