Stakeholders have provided hundreds of pages of comments to the Commodity Futures Trading Commission (CFTC) regarding proposed limits on energy futures. The 90-day comment period ends today.
Although the vast majority of the submissions to the U.S. regulator are copies of identical form letters, there are original comments in the mix.
Writing for DB Commodity Services LLC, which administers the PowerShares DB Oil Fund exchange-traded fund (ETF), CEO Hans Ephraimson argued that the limits had the risk of “removing from the market a significant source of liquidity; disenfranchising the thousands of public retail investors who invest in Passive Pools as a mechanism to prudently access these markets as diversification and hedging tools; preventing the passive long trader's affiliated commodity pools, if subject to aggregation, from using the futures markets; causing these traders to utilize OTC derivatives and foreign markets as alternatives, which are less transparent and less-regulated markets; increasing price volatility and distortion of price discovery signals; and leaving foreign markets as the focal points for commodity price discovery.”
Nicholas D. Gerber, CEO of the U.S. Commodity Funds LLC, which administers the USO ETF, wrote: “We appreciate the Commission's efforts to ensure well-regulated, transparent energy markets. However, we do not believe that the proposed rule will further the Commission's efforts in this area. In fact, the unintended consequences of the proposed rule may lead to even less transparency and more risk for investors in the financial energy markets.”
Among the letters in support of the limits is Tom Fowler's. Fowler runs Fowler Oil Company Inc., which operates a convenience store gas station.
“Financial investors, including banks, hedge funds and index funds, speculate in the energy commodities markets for profit, rather than commodity-related business and users, who do so to protect themselves from volatility and risk,” Fowler wrote.
While Fowler did admit that “[s]peculators take on the risk that hedgers seek to shed,” he added that “speculation should not dominate the markets.”
You can access a document on the CFTC's website that contains all the comments by clicking here.