Stop Wall Street from undermining food speculation rules

by Catherine Negus, Campaigns Assistant

Last month thousands of people helped us to counter bankers’ attempts to weaken European proposals for regulation of food speculation by responding to the consultation on derivatives reform. Now we need your help again.

In the US, legislation which included rules to tackle excessive speculation on food - the Dodd Frank Financial Reform Act - was passed last year. Now Wall Street is fighting hard to make implementation of the Act difficult and to enable bankers to continue making huge profits from gambling on hunger.

In the US the Commodities Futures Trading Commission (CFTC) is deciding how to implement the legislation and lobbyists from Wall Street have held numerous meetings with the regulator, pressuring it to water down the rules.

As global food prices rise to record levels it is essential that the CFTC hears from people in the US and around the world that they must put the basic needs of the world’s most vulnerable people before bankers’ profits.

Action against excessive speculation must be taken on a global scale. If regulators in the US don’t introduce effective regulations it will undermine efforts to regulate these markets in Europe and elsewhere. Financiers in the US command huge amounts of money which they can pour into commodity markets, having an impact on food prices around the world. And if speculation is not held back in the US, bankers in financial centres such as London can blackmail their governments out of regulating by threatening to move abroad.

To put pressure on the CFTC to introduce effective regulation, please do the following:

Please send a comment to the CFTC today:

1) Go to http://comments.cftc.gov, scroll to the rule with the deadline of 3/28/2011, labeled “Proposed Rule 76 FR 4752 // 17 CFR Parts 1, 150 and 151 Position Limits for Derivatives.”

2) Click on “submit comment” and fill in your name and information

3) Either paste in the sample text below, or even better, create your own text using these two key points:

a. In order to avoid food and energy price bubbles like those which occurred in 2008, the CFTC should implement the proposed speculation limits.

b. Only give exemptions to businesses that deal in physical commodities (like farmers, gas stations, etc.). Do not give any exemptions to banks, hedge funds or other financial players.

Sample text:

I applaud the Commission’s efforts to implement the Dodd-Frank Act as thoroughly as possible, especially reforms aimed at limiting excessive speculation in food and energy commodities.

While many factors contribute to today’s highly volatile commodity prices, it is clear that excessive speculation is partially responsible, as shown in dozens of studies by members of respected institutions such as Princeton, MIT, Citigroup, the Petersen Institute, the University of London, Yale, UNCTAD, the FAO, and the U.S. Senate.

I urge the Commission to implement the proposed rules regarding aggregate speculative position limits to prevent excessive speculation. At this time of fragile economic recovery, we cannot allow speculators to unduly affect our food and energy prices.

Congress called for exemptions from these limits for bona fide hedgers. I ask that the Commission define that term in the strictest sense possible, limiting exemptions to businesses that deal in physical commodities and use markets to hedge commercial risk in those commodities. Banks, hedge funds, private equity and all passive investors in commodities should not be deemed as bona fide hedgers. Institutions hedging price directional bets such as commodity index swaps, Exchange Traded Funds and Exchange Traded Notes also should not be considered as bona fide hedgers.

(Note: The site says the deadline is March 28, but the CFTC has announced numerous times that it will accept comments after that date, so please send your comments even after the deadline.)