Comment Text:
10-002
COMMENT
CL-06283
From:
Sent:
To:
Subject:
[email protected]
Tuesday, April 13, 2010 10:24 AM
secretary
Proposed Speculative Position Limits on Energy
Edward Merlis
8202 Hunting Hill Lane
McLean, VA 22102-1303
April 13, 2010
David Stawick
Secretary, Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
Dear Mr. Stawick:
I am writing in support of the CFTC's Proposed Federal Speculative
Position Limits designed to reestablish speculative position limits on
major energy commodities. This rule will provide stability to the
marketplace and help prevent future price bubbles.
In recent years the oil market has been completely detached from supply
and demand fundamentals. While there are invariably price swings due to
anticipated economic and geo-political activity, e.g. potential recession
or recovery, hostilities in oil-producing areas, hurricanes, etc. the
disconnect between supply and demand in recent suggests that some other
variable is at work. The evidence is that the variable influencing the
energy market has been the substantial increase in financial players
engaging energy commodities trading.
That is understandable as low margin requirements for financial
participants in the commodities market enables these participants to take
risks without meaningful penalties for failure. Between the low margin
requirements and the lack of position limits, institutional investors,
soverign wealth funds, and index speculators have been able to undermine
the meaningful functioning and utility of the commodities markets for
price discovery and hedging risk.
The CFTC needs to move expeditiously to approve a strong rule to protect
all Americans. As it is, the only Americans who are currently protected
are those who gamble with our collective future. Wall Street's speculative
trading in oil not only hurts the economy, but hurts every American who
pays excessive prices at the pump, for groceries, home heating oil and
everything related to transportation.
Our tax dollars were used to bail out large Wall Street firms when they
were on the brink of bankruptcy. It is these same institutions that
pushed the price of gasoline well past $4 per gallon in 2008 by gambling10-002
COMMENT
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on oil. Two years have elapsed and they are still at it; profiting at
every American's expense.
Position limits existed in energy markets until 2001 and currently apply
to agricultural commodities. CFTC should use its existing experience to
regulate position limits of speculators and prevent excessive
concentration in the energy markets, while ensuring that exemptions to
these limits be afforded to real physical players such as fuel
cooperatives and wholesalers, refiners, utilities, truckers and airlines.
Moreover, we cannot afford to have exemptions that enable banks and
billionaire investors exploit exemptions from position limits by acquiring
oil related "fronts" such as service stations or other low cost
enterprises that appear to have a physical requriement for oil and
products. That was done by oil traders in the 1970's during price
controls, resulting in so-called "daisy chains" that traded oil
repeatedly, increasing the price with each trade as permitted by Federal
regulations.
Energy consumers desperately need stability in the marketplace. I
encourage the CFTC to adopt the Proposed Federal Speculative Position
Limits before volatile fuel prices further harm the country's already
weakened economy.
Sincerely,
Edward Merlis
703-506-1059
