Isda seeks to dispel speculation myths with commodity website
The International Swaps and Derivatives Association is playing a more active role in the debate on the impact of speculation on global commodity prices, setting up a new website designed to dispel what it sees as myths about the impact of investor activity.
In a blog post on January 18, the industry group announced the launch of commodityfact.org, which intends to “address misperceptions about commodities markets and to explain the wider role of commodity investing”, according to Isda. It comes in response to popular pressure about the perceived impact of commodity investment on prices and volatility, particularly in markets such as oil and agricultural commodities.
“There are misperceptions regarding some of the issues driving the commodity market,” says a New York-based spokesman at Isda. “There’s been a lot of research done on issues such as price changes and volatility, and it’s become evident the research wasn’t reaching everyone it needed to reach. That’s why we decided to put a website together that really focuses on the facts and the evidence regarding these key issues and lets that information speak for itself.”
The website seeks to address four main questions around commodity markets and trading. They include what the driving factors are behind commodity price changes, how increasing financial interest affects commodity markets, whether speculation is driving increases in global food prices and whether the imposition of position limits will help counter price volatility.
It comes as the Commodity Futures Trading Commission (CFTC) faces a tough battle to revive a proposal to impose position limits covering futures and over-the-counter swaps referencing 28 physical commodities. On September 28, a US district court judge ruled that the Dodd-Frank Act required the agency to find that excessive speculation had created “an undue burden” before it applied the curbs, in response to a successful legal challenge by both Isda and the New York-based Securities Industry and Financial Markets Association. The CFTC voted to appeal against the ruling on November 15.
Bart Chilton, a Washington, DC-based commissioner at the CFTC and a leading advocate of position limits, believes few people will be convinced by Isda’s efforts. “There is overwhelming evidence and many academic studies that show a link between excessive speculation and prices,” he says.
This article was first published on Risk