Sen. Blanche Lincoln's new bill on derivatives legislation raises some eye-watering questions on how far banning trading on certain commodities could go. The Wall Street Transparency and Accountability Act of 2010, released by the Senate last week, would ban trading on onion futures and motion picture receipts. According to the Financial Times, onion futures haven't been traded since 1958 upon protest by farmers after prices collapsed. The FT story says that some argue that the ban on exchange trading for onions (which is supported by the National Onion Association) actually contributes to price volatility in the onion markets.
The issue of trading on movie receipts has also been a controversial one, with Hollywood protesting futures trading in movie receipts and the CFTC approving Media Derivatives, Inc. (MDEX), the company angling for box office futures contracts, as a designated contract market on Friday. MDEX will operate under the name TrendExchange. The actual motion picture receipt contracts are still under consideration by the CFTC.
Since the market meltdown of 2008, Washington's attack on "speculation," blaming traders for price volatility in the energy (and now to some extent, metals) markets has been all the rage. Although onions and movies have stayed out of the trading mix, one has to wonder if the proposed ban could be part of a trend that would ban or restrict other commodities from trading.