Commodities Traders May Face REE Curbs
Source: Bloomberg, Ben Moshinsky and Jim Brunsden (2/2/11)
"EU plans 'priority actions' to ensure access to 14 'critical' raw materials."
Curbing the proportion of a commodity derivatives market that a single trader can control may help rein in "excessive speculation," the commission said in an e-mailed statement.
"We need regulators to keep a closer eye on positions taken up in respect of commodity derivatives," Michel Barnier, the EU's financial services chief told reporters in Brussels today. "This will include the possibility of introducing position limits if necessary," he said.
The possible trading measures are included in a strategy paper published today by the commission on commodities markets and raw materials.
The commission, the 27-nation EU's executive arm, said it plans to identify "priority actions" to ensure access to 14 "critical" raw materials. This list includes so-called rare earth elements.
Position limits restrict the relative share of the market occupied by one investor. Such limits should take account of "the specificities of the different types of derivative products," and the "evolution of the physical market of the relevant commodity," the commission said.
Restrictions could be applied to derivatives both traded on exchanges and over the counter, the commission said. Barnier said the EU executive is examining whether to apply them to "real" markets as well as derivatives.
Measures will be included in draft laws on market abuse and transparency of securities transactions that the commission plans to present "before the end of the summer," Barnier said.
Investment funds "have a lot of clout and if they put themselves on one particular side of the scale then that is going to affect markets and prices," said Dacian Ciolos, the EU's agriculture commissioner.
One "possible reason for volatility is because there is a lack of transparency," Ciolos said.