After a cruel summer for speculators, Congress rejected two bills that would have limited speculation in the commodity markets before it left for August recess. On July 25, the Stop Excessive Energy Speculation Act of 2008 failed to receive the required votes for continued consideration by the Senate. The bill came under fire from the Coalition to Protect Competitive Markets, an organization made up of exchanges and industry advocates. The coalition said that the bill would have “drive[n] commodity trading overseas, rather than providing long-term solutions to our energy needs.”
On July 30, the Commodity Markets Transparency and Accountability Act, a bill that would have required foreign boards of trade to adopt speculative position limits,
was rejected by the House of Representatives. That bill would have required the Commodity Futures Trading Commission (CFTC) to set trading limits for agricultural and energy commodities and would have limited eligibility for hedge exemptions to “bona-fide” hedgers, required more detailed reporting from index traders and swap dealers and increased staffing at the CFTC. Because it was brought up under suspension of House rules and was not amendable, the bill needed two-thirds of those present and voting to pass, and failed narrowly with a vote of 276-151.
After the vote, the bill’s sponsor, House Agriculture Committee Chairman Collin Peterson (D-MN), said that the bill “was well on its way to being passed…then Republican leadership demanded that members change their votes in order to protect President Bush.” Before the vote, the White House released a statement saying the bill “offer[ed] poorly targeted short-term measures that [did] nothing to address the fundamentals of supply and demand that bear the primary responsibility for current high energy prices.”
William Adams, managing director at JKV Global, says, “Any additional [government imposed] measures would probably increase risk because the open interest and liquidity would be pushed to other exchanges or markets.” John Hummel, president and CIO of AIS Futures Management LLC, agrees, saying, “I’m concerned about the trend [where lawmakers] keep piling on more regulation. It never really catches the crooks beforehand. Politicians don’t appreciate the importance of deep, liquid markets and anything you do to drive away certain potential participants thins the markets out and ultimately [makes them] more volatile and erratic.”