The following is an excerpt from DAVID SHEPPARD | April 20, 2012 | Thefiscaltimes.com |
Under Obama’s request to Congress, the Commodity Futures Trading Commission (CFTC) would determine how much speculators need to pay to trade U.S. crude oil futures, in theory increasing the amount when prices move too far, too fast. But economists and traders cautioned that pushing smaller investors out of markets would only hand greater influence to the largest hedge funds and Wall Street banks. Ultimately, there may not be enough traders left to do business with oil producers and consumers looking to hedge their needs.
“Reduced liquidity often means greater volatility,” said broker Jay Levine at Enerjay LLC in Maine. “That’s the exact opposite of (Obama’s plan’s) purpose.”
RELATED: Obama Goes Mano-a-Mano with Oil Speculators
Exchange-operator CME Group, which currently sets margin requirements for the benchmark U.S. crude oil contract, on Tuesday called the president’s plan “misplaced,” and said speculation should not be confused market manipulation. CME charges separate margin rates for speculators and end-users of oil such as airlines, who are hedging their physical needs.
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