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Stop profiteering by oil price speculators
Updated March 16, 2011
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Stop profiteering by oil price speculators
March 15th, 2011, 12:04 PM
Posts: 2,988 since Nov 2010
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Quoting
Dear Chairman Gensler,
There is strong evidence the recent surge in gas prices has little to do with the fundamental supply and demand for oil. Government data confirm that oil speculators are driving the price increase. We urge you to restore integrity to our energy markets by exercising the CFTC’s authority to require higher margin levels for speculative oil futures contracts .
Speculators are seizing on recent political turmoil in North Africa and the Middle East to drive energy prices to unwarranted levels. The Commitment of Traders Report reveals that speculators have flooded into the market in recent weeks. Since protests began in Egypt on January 25, 2011, money managers have increased their long positions in NYMEX West Texas Intermediate crude oil futures contracts by more than 35 percent, or the equivalent of 75 million barrels of oil. Oil speculators have increased long positions on the Intercontinental Exchange by nearly 50 percent. At the same time, actual legitimate hedgers have reduced their long positions in the oil futures markets.
The loser in this game of oil speculation is the American consumer. Rising oil futures translate into higher gas prices, and that means Americans have less money in their pockets to pay for basic needs.
In the Dodd-Frank Wall Street Reform and Consumer Protection Act, we empowered your Commission with a number of new tools to rein in excessive speculation and prevent market failures. In addition to mandating speculative position limits, we removed the broad statutory restriction that prohibited the CFTC from imposing higher margin requirements. Section 736 authorizes the CFTC to require higher margin requirements in order to protect the financial integrity of the futures trading markets. Now is the time to exercise that authority. New margin requirements could take effect as soon as July, but the CFTC must begin the rulemaking process now. Higher margin levels would reduce incentives for excessive speculation by requiring investors to back their bets with real capital.
For the same reason we don’t let pharmaceutical companies approve their own drugs, we shouldn’t let futures exchanges self-regulate by setting their own margin requirements. This hand’s-off, self-regulatory approach has led to a fundamentally inequitable system in which ordinary investors are required to post 50 percent margin to buy a stock, but Wall Street traders post only six percent to purchase a risky and volatile futures contract .
We urge you to act quickly to raise the margin requirements imposed on speculative oil contracts . The margin increase should only apply to speculators, not legitimate hedgers. This is consistent with current exchange policies that apply different margin requirements for investors and bona fide hedgers. With your leadership, we can discourage damaging and excessive speculation in the oil markets and bring down gas prices. Sen. Bill Nelson (D-Fla.) is a member of the Senate Budget, Commerce and Finance Committees.
More here : Stop profiteering by oil price speculators - The Hill's Congress Blog
I have to say - I do agree that speculation is driving prices and it is no longer supply and demand for oil but supply and demand for contracts that drives prices.
Anyone?
Can you help answer these questions from other members on NexusFi?
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March 15th, 2011, 12:10 PM
Columbus, OH
Market Wizard
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DionysusToast
I started a similar thread here:
March 15th, 2011, 12:15 PM
Posts: 2,988 since Nov 2010
Thanks Given: 831
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Sorry abt that - I missed it - how do we get the powers that be to merge the threads?
March 15th, 2011, 12:21 PM
Columbus, OH
Market Wizard
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DionysusToast
Sorry abt that - I missed it - how do we get the powers that be to merge the threads?
no problem. probably a mod would have to do that. but I don't care if there's more than one thread, because it's an interesting and important issue.
increasing margins is one step. another could be trading halts after a certain move. or my favorite one, no day trading allowed (maybe except the hedgers).
March 15th, 2011, 12:40 PM
Posts: 2,988 since Nov 2010
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I wonder if day trading has the impact though.
A day trader would be neutral at the end of the day so long term price impact should be minimal, right?
Still - I'd be OK with $25k margin for a crude contract . It would be a very different market though....
March 15th, 2011, 12:57 PM
Columbus, OH
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DionysusToast
I wonder if day trading has the impact though.
A day trader would be neutral at the end of the day so long term price impact should be minimal, right?
Still - I'd be OK with $25k margin for a crude
contract . It would be a very different market though....
could be. I'm just wondering how much volume is done by day traders. I bet it's a lot. and if that volume is missing, then maybe this market is less attractive for speculators in general.
March 15th, 2011, 01:31 PM
Houston,Tx
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Typical short sighted knee jerk reaction from a sound bite seeking politician who lacks any understanding how the markets work.
Make it too difficult to trade here... big boys will just go offshore...
The Dubai Exchange would love to become the world trading center for Oil...
Even if they outlawed oil speculation ...
How are they going to control foreign traders?
Wall Street will just have their foreign offices handle the trading.
This should work well , I mean the Kyle bill made all the internet gambling sites go out of business ... right?
Gov'ment needs to stay outta the Ol Bidness....
Regards,
TMFT
I'm just a simple man trading a simple plan.
My daddy always said, "Every day above ground is a good day!"
March 15th, 2011, 01:49 PM
Columbus, OH
Market Wizard
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ThatManFromTexas
Typical short sighted knee jerk reaction from a sound bite seeking politician who lacks any understanding how the markets work.
Make it too difficult to trade here... big boys will just go offshore...
The Dubai Exchange would love to become the world trading center for Oil...
Even if they outlawed oil speculation ...
How are they going to control foreign traders?
Wall Street will just have their foreign offices
handle the trading.
This should work well , I mean the Kyle bill made all the internet gambling sites go out of business ... right?
Gov'ment needs to stay outta the Ol Bidness....
Regards,
TMFT
I'm not a politician, but lacking understanding. would you mind enlighten me how markets work?
thank you.
March 15th, 2011, 01:54 PM
Houston,Tx
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Trading: TF
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Silvester17
I'm not a politician, but lacking understanding. would you mind enlighten me how markets work?
thank you.
Disclaimer: I am not a programmer, coach, trainer or self appointed guru and do NOT hold myself up to be a good example for anything. I do not have a book, trading room or seminar. Even though I have an opinion on every subject you can imagine, I do not give financial advice.
I'm just a simple man trading a simple plan.
My daddy always said, "Every day above ground is a good day!"
March 15th, 2011, 01:58 PM
Columbus, OH
Market Wizard
Experience: None
Platform: NT 8, TOS
Trading: ES
Posts: 3,603 since Aug 2009
Thanks Given: 5,139
Thanks Received: 11,527
ThatManFromTexas
Disclaimer: I am not a programmer, coach, trainer or self appointed guru and do NOT hold myself up to be a good example for anything. I do not have a book, trading room or seminar. Even though I have an opinion on every subject you can imagine, I do not give financial advice.
thanks. but you do have a good sense of humor. that's worth a lot.
Last Updated on March 15, 2011