The Futures Industry Association today issued the following statement from FIA President John Damgard regarding the Commodity Futures Trading Commission’s staff report on commodity swap dealers and index traders:
First, we applaud the CFTC's efforts to deepen the public’s understanding of the dynamics of the commodity futures markets. Today’s report sheds more light on how these markets function, and that is good for everyone who uses these markets and the public at large.The FIA is the leading trade organization for the futures industry. Its membership includes the world's largest futures brokers as well as leading derivatives exchanges from more than 20 countries.Second, today’s staff report provides us all with the most authoritative source of data yet available on the role of index traders and swap dealers in the commodity futures markets. Previous estimates for the size and influence of index traders on energy prices were based more on extrapolations or assumptions derived from public data and often came to mistaken conclusions.
Third, today’s staff report confirms what many commodity market participants have been saying for some time: the inflows and outflow of investor money simply do not correlate with the movements of commodity prices. The report finds that during the first six months of the year, crude oil prices rose by 46% but the number of futures contracts held by index traders that would profit from higher oil prices actually declined by 11%. This clearly contradicts the theory that a “tidal wave” of investor money pushed energy prices higher.
Fourth, regarding the CFTC’s preliminary recommendations, the FIA supports the CFTC’s call for more resources for conducting market surveillance. The staff report confirms that the CFTC’s market surveillance powers are robust and do not need reform. We also support providing the public with more accurate and comprehensive market composition data. We look forward to reviewing the details of the CFTC's proposals to achieve these objectives without imposing undue burdens on U.S. market participants or firms.