CFTC Commissioner Chilton Restates Concerns about Penalties, Passive Investment Funds and High-Frequency Traders

CFTC Commissioner Bart Chilton spoke at the National Grain and Feed Association's Conference, continuing his campaign against passive investment funds and high-frequency traders, while again asserting that the CFTC should have the power to impose higher penalties. Below are the Commissioner's main points and suggested remedies:

• Commissioner Chilton argued that the record price of oil in the summer of 2008 was caused by speculation by "Massive Passives," large pools of managed money that invest in commodities in a passive manner. Chilton claims that large positions by such large funds can distort markets and increase prices, which are eventually passed along to consumers. In response, he stated that speculative position limits were needed to prevent market distortions.
• In addition to speculation, the Commissioner said that the prevalence of high-frequency trading was creating an illusion of market liquidity due to wash sales. To stem this problem, Chilton called for wash trade blockers, kill switches for high-frequency trading, and registration for high-frequency traders.
• Finally, Chilton maintained that current penalties were antiquated, calling for higher monetary penalties for market participants who break the rules.

Click here to view speech in full (links externally to CFTC website).
Related News: "CFTC Commissioner Chilton Speaks at the 2013 Arkansas State University Agribusiness Conference" (Feb. 13, 2013).