"It is critical that the derivatives markets – both futures and swaps – work for hedgers, the farmers, ranchers, producers and commercial companies in the real economy. Futures and swaps markets allow them to lock in a price and focus on what they do best – servicing customers, producing products and investing in our country’s future. As it’s the hedgers in the real economy – the non-financial side – that provide 94 percent of private sector jobs, it’s all the more important that these markets work for America’s job providers.
The derivatives markets that the CFTC oversees are where hedgers across the country meet financial firms, and others generally called speculators. Over time, the makeup of these markets has shifted dramatically. Financial firms and speculators now make up the vast majority of these markets.
For instance, producers, merchants, processors and other end-users make up approximately 15 percent of the crude oil futures market. Swap dealers, managed money accounts and other financial actors make up the remaining 85 percent. In Chicago Board of Trade wheat contracts, end-users make up nine percent of the long and 29 percent of the short positions, meaning that over 70 percent of this market consists of financial interests.
The CFTC is not a price-setting agency. Our critical mission is to ensure that derivatives markets are transparent, and free of fraud, manipulation and other abuses. Our mission is particularly important considering hedgers, America’s job creators, use these markets to lock in a price and make their investments. Given the dominance of financial actors and speculators in these markets, it’s that much more crucial that the CFTC is well funded so that we can ensure these markets work for hedgers. The need for adequate funding is highlighted by rising gas prices at the pump."
Futures Magazine, CFTC's Gensler Addresses Budget at Senate Hearing, March 21, 2012
Most astute market participants do not need Mr. Gary Gensler to tell them that the financial interests dominate the US commodity markets. But it is good to hear nonetheless.
Perhaps he can drop a note to his boss, President Obama. And cc a certain Nobel-Prize-winning economist whose models apparently inform him it is impossible for the financial tail to wag the dog, even when those financiers dominate the market with virtually free money supplied to them by the Federal Reserve Bank.
While it is obviously necessary for Chairman Gensler to have more funds if he is asked to regulate the much larger swaps market, I would be negligent in not mentioning that the figures he quotes about market distortions represent areas that are already under his purview and not some new addition.
The futures industry in America is starting to look like a modern day version of Upton Sinclair's The Jungle. Except in the update they slaughter people's livelihoods and wealth to feed the greed of Wall Street, instead of butchering animals to eat.
The CFTC has been almost notorious in its failure to act on repeated complaints of market manipulation under its existing authority except in the most symbolic of ways, as if handing out tickets for jay-walking, during a period of all out gang war on the public interest. And the public is getting tired of it.
