CFTC acts to shut out grain futures speculators

The US Commodity Futures Trading Commission (CFTC) has approved new rules designed to reduce distortions in the soft commodity futures markets caused by speculative activity.

Following complaints from the farming industry that speculative investment had caused a "disconnect" between cash and future prices for grains on the Chicago Board of Trade, the exchange, acting with CFTC approval, will limit "non-commercial" holdings of delivery instruments - receipts and shipping certificates - on several listed grains.

Dealers will have until the end of May to reduce holdings to below the speculative position limit for the spot month.

The National Grain and Feed Association said speculative capital had inflated the price of grain futures, slowing the convergence between spot and futures prices and making hedging of production more difficult for farmers and consumers.

The House of Representatives' agriculture committee is now considering a draft bill which would increase reporting requirements for speculators in the agricultural futures markets. It is also proposing similar limits on credit default swap trading, which would limit CDS holdings to investors who also hold the underlying bond.

See also: US committee drafts proposed ban on naked CDSs