What do the new US regulations on commodity speculation mean in practice?

A few weeks ago the US Commodity Futures Trading Commission, responsible for regulating commodity speculation, voted to introduce position limits. Position limits are essentially rules on how much of the market one particular trader can control at any one time and are one of the key demands of our campaign in Europe.

So this is great news, right?

Well, it’s a step in the right direction. But unfortunately it seems the limits are too high – 25 per cent of the market – to be effective. The law also allows for quite substantial exemptions which speculators can exploit.

However, there are also some good things in the new regulations. The 25 per cent rule is based on the amount of physical commodities in the market, not on the amount of speculation. This means that the market will be partly reduced, although not enough to completely reduce the massive price volatility seen in recent years. 

Professor Bob Pollin from the US campaign explains it well in this video.