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| Subject: Regulatory arbitrage under way in commodities-CME Tue Mar 23, 2010 10:55 pm | |
| Differing plans for the regulation of commodity markets around the world risks driving traders to the least transparent exchanges, a managing director at CME Group said on Tuesday.
Bob Ray, CME’s head of international products and services, told Reuters on the sidelines of the UN Global Commodities Forum in Geneva that “regulatory arbitrage” was already under way.
“The ambiguity in some global markets is already encouraging some trades to move to other markets,” Ray said. “To make any kinds of changes effective they have to be coordinated globally.”
Regulation of commodity markets has been under the spotlight since prices across a broad range of markets soared to all-time highs on the eve of the financial crisis, before plummeting as the worldwide recession took hold.
The U.S. Commodity Futures Trading Commission (CFTC) has proposed imposing stricter trading positions on speculative investors in energy markets, but has faced resistance from some groups.
The Futures Industry Association said last week the moves risked hurting markets and cited a rash of studies saying speculators were not responsible for distorting energy prices. [ID:nN18245222]
The CME Group runs the NYMEX Exchange, the world’s largest futures exchange for oil where the benchmark West Texas Intermediate contract, or U.S. crude, is most actively traded. [ID:nCFTCREG]
Ray said he supported the “dialogue” between the U.S. CFTC and Financial Services Authority in London, but was concerned more oil trade could move to smaller exchanges with less regulatory oversight or into the over-the-counter (OTC) market.
“We understand where the CFTC is coming from, but our fear is that without position limits across the board, in a totally integrated market place, then it really is a self defeating situation,” Ray told the conference. “Capital is apolitical.”
Ray added that he would like to see a large percentage of the OTC market move to trading on electronic exchange.
“The plain vanilla products could easily be cleared,” Ray said. “In the long-run it would be a positive for the market as it increases transparency.”
http://blogs.reuters.com/david-sheppard/2010/03/23/regulatory-arbitrage-under-way-in-commodities-cme/ |
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