Comment Text:
The commodity markets were created to serve bona fide commercial hedgers as a tool for risk mitigation and as a pricing bellwether that is reflective of real-world supply and demand fundamentals. Deregulation and massive positions held by speculators have distorted these markets.
Commodities such as energy and food are vital resources to American industries, businesses and consumers first and foremost. Speculators have a role in providing liquidity to the market and helping energy and agriculture companies and consumers manage price risk. But when they dominate these markets (as they do now) they have the opposite effect. They undermine these business’ hedging needs and distort the price discovery functions of the markets.
For example, high frequency trading or “computer algorithmic based trading” is claimed to be a product of too much regulation. But this method is not reflective of real-world supply and demand but is the product of innovation serving speculation and has been partly responsible for the “flash crashes” witnessed in the securities markets such as the 1000-point plunge in the Dow on May 6, 2010.
The position limits rule will play a crucial role in reestablishing the true purpose of these markets. I urge adoption of this rule.
I thank you for your consideration,
Sincerely,
Thomas F. Sullivan
