Comment Text:
[Dodd-Frank Act section 747 also amends section 4c(a) by granting
the Commission authority under new CEA section 4c(a)(6) to promulgate
such ``rules and regulations as, in the judgment of the Commission, are
reasonably necessary to prohibit the trading practices'' enumerated
therein ``and any other trading practice that is disruptive of fair and
equitable trading.'']
It is important not to allow trades which are disruptive of fair and equitable trading practices. To combat foreign speculation driving up the price of commodities for the U.S. market, all products must be limited to the average price of that commodity worldwide, for the previous week. This will take the U.S. demand out of markets which are increasing in price, and return them to more normal levels consistent with the available supply. To prevent U.S. companies from being damaged by such a policy, the rule must also require the right of first refusal to the domestic market, before offering any commodity to the international market. Thus domestic companies can sell their product into the domestic market at the average international price, and if the supply of the domestic market is saturated, they can sell it at the average international price on the international market.
Failure to implement the average international price rule exposes domestic companies to international speculation and price gouging.
Failure to implement the right of first refusal rule exposes domestic companies to being unable to sell their products (when foreign speculators drop their arbitrary too high prices) for a reasonable price, or being left without a market when prices are being bid up by foreign speculators.
The international average price rule is no different than the market price itself, with the difference that rapid price oscillations are damped out.
The right of first refusal is no different than the clause in many corporate charters that stock must be sold to the current members of the corporation before it can be sold to outside interests. The rule simply substitutes the United States as the party at interest, while providing a fair market price for the commodity.
Hedge funds, and other internationally based equity measures, exacerbate the inequities of disruptive trading practices by shielding the sources of the trades from being identified as the source of the speculation, the rapid rise in prices, or the consequent collapse of the market. While the average international price rule and the right of first refusal rule are important general policies for the CFTC to adopt, they are especially important in the hedge fund and derivative trading market because of the size (and/or) dollar volume of the trades. It is important to protect the markets from these sources of international speculation, and to protect the domestic market from the losses such speculation generates, much less the devastation that unbridled speculation has on the domestic economy.
