US Imposes New Curbs on Commodity Trading

Posted October 18th, 2011 at 2:50 pm (UTC-5)
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U.S. regulators have imposed new rules on commodity trading, seeking to curb excessive speculation that some analysts say contributed to the world financial turmoil in 2008 and more recent spikes in oil and grain prices.

The Commodity Futures Trading Commission voted to approve the regulations that will put a cap on the number of trading contracts that any single speculator can hold, on the theory that by limiting trading, price increases will be kept in check. Adoption of the new rules puts the U.S. at the forefront of increased regulation of investment trading on commodities that are consumed throughout the world.

Across the globe, more than $600 trillion worth of trades are made annually, about half of it in the U.S. But the new U.S. rules could push more commodity trading to other countries where the rules are not as stringent.

Some Wall Street investors and trading companies affected by the U.S. proposal had opposed the new rules, and they were weakened before being approved. The commodities trading agency had been required to adopt limitations under the country's financial regulatory reforms approved by Congress a year ago.

The commission's chairman, Gary Gensler, said the new rules covering trading in 28 commodities would ensure that no one investor could control too much of any single commodity. He called the new regulations “one of the more significant rulemakings” to lower risk to the world's financial system.

The commission's three Democrats formed the majority approving the rules, while two Republicans on the panel opposed the changes.