CFTC Commissioner Giancarlo Warns Against Limiting Producers' Ability to Hedge
Commentary by Steven Lofchie
CFTC Commissioner Giancarlo warned the CFTC not to promote policies that "needlessly impinge" on farmers' ability to hedge against plummeting commodity prices. End-users should not become the "collateral damage" of the CFTC's new regulations, he admonished.
The Commissioner remarked that Regulation AT would force participants to register with the CFTC as "floor traders" for the first time due to the broad definition of "algorithmic trading." He explained that the new floor traders, who are in fact the same market participants that were just provided relief from unnecessary and burdensome recordkeeping requirements under CFTC Rule 1.35, now would be perversely burdened again.
He emphasized that "correcting undue restrictions on bona-fide hedging is vital to American Ag and energy producers and their ability to manage risk." He cautioned that, in its effort to set limits for other commodities, the CFTC must not eliminate "tried and true" hedging strategies for cotton producers, shippers and merchants.
Commissioner Giancarlo delivered his remarks at the Annual Conference of the American Cotton Shippers Association.
Commentary
Burdensome rules imposed on financial market participants can hinder the entire economy. The effects might be obvious to some, but seem utterly lost on others. Instead of trying to convince "public interest" advocates that strict position limits on energy are economically absurd (the best way to "hoard" oil is to keep it in the ground, which is not an act that is subject to position limits), Commissioner Giancarlo is better off bemoaning the plight of the virtuous farmer.