o CFTC Looking for Excessive Speculation

The CFTC has woken up to the fact that speculation may have behind the commodity bubble of the last few years. The easiest place to look for speculation in with Exchange Trade Funds (ETF's) and Commodity Index Funds. These "investment" vehicles allow retail traders, mom and pop Smith, access to the commodity markets. Billions of dollars worth of investment money pour through these funds and that are used to buy (long only) front month futures contracts. One of the biggest sources of speculation are the "investors" in these types of funds, driving prices higher by buying futures contracts each month. Its retail money, aided by the ease of electronic trading, that leads to the speculative bubbles. The government is misdirected when it focuses on institutional players. Large financial institutions provide liquidity that enables end users and producers to hedge their risk in the financial markets.

Recommendations:

I see the problem as retail "investors" being involved in an institutional market.

1) Keep all futures contracts in "big" volume sizes. E-mini's cut the size of a contract in half or a quarter allowing smaller speculators to trade.

2) Disallow the aggregation of funds to purchase a futures contract. This will effectively eliminate ETFs and Commodity Index Funds. The market should be left to large, professional traders. Then prices are determined by supply and demand and not retail money flow.

3) Force all futures exchanges, whether on shore or offshore, to publish volume data.