Comment Text:
November 17, 2010
Commodity Futures Trading Commission
Attn: David A. Stawick, Secretary
Three Lafayette Centre, 1155 21st St. NW
Washington, DC 20531
Re: RIN 3038-AD01
As a citizen and retired applied economics professor concerned about “the little guy,” I have been following the financial problems of recent years, the evolution of the Dodd-Frank Act, and current steps to implement it. I understand that CFTC in concert with SEC is now focusing on exchange and clearing house rules bearing on ownership and conduct. This is to urge that you not let banks, dealers and other financial actors dominate. Please see to it that governance effectively includes those who actually produce, process, and use commodities. They need exchanges and procedures that help discover true supply-and-demand for commodities and that provide affordable ways to buffer against risks and fluctuations.
In following these problems and proposed reforms, one source of useful information has been the Commodity Markets Oversight Coalition. I can see why CMOC is worried about the danger of merely specifying that no one entity have more than more than 5% ownership/voting interest. It wouldn’t take many intertwined financial interests to cluster together and end up in control. The proposed rule of allowing one entity to have up to 20% interest, but no aggregation of over 40% could provide better assurance that those who really need the commodity markets aren’t overwhelmed by financial manipulators.
In my work as an ag economist and extension educator in Iowa, Tennessee and Texas, I have seen how farm families depend on reliable information and futures arrangements in orderly commodity markets for making plans and hedging against big losses.
My advisor roles in low-income areas in the U.S. and abroad, and as the Situation-Outlook Chief of the UN Food and Agriculture Organization, have shown how erratic markets, prices and exchange rates can really mess up efforts to increase productivity and self-reliance, to reduce poverty, and to assure affordable access to food and other basic needs.
Retirement in my native New England has reminded how essential it is for many households and small businesses to be undergirded by exchanges that help to reduce—and not amplify—price uncertainties for heating fuel, housing, life savings, and other basics. Even here in Newport RI (most of us don’t live in mansions), lots of people are in tight straits and can’t absorb market booms and busts.
Looking ahead, the new carbon exchanges and other environmental/energy-related derivatives that may emerge can have much impact on the sustainability of our region and others. It will be important to see that they work well.
In sum, please set the rules of ownership and control so that futures trading is balanced exchange between those needing commodity risk protection and those who can bear risk. Don’t let these markets be playgrounds for aspiring billionaires.
With every best wish,
David W. Brown, Ph.D.
Professor and program leader (ret.)
Agri-resource economics and international development
Newport RI
Email [email protected]
