Thursday, June 19, 2008

Manipulating Market Manipulation

ManipulationThe U.S. Commodity Futures Trading Commission (CFTC) recently announced that it would be investigating agriculture futures markets, “including the lack of convergence between the futures and cash prices, the impact of higher margin requirements, and the role of speculators and commodity index traders.” This comes on the heels of last month’s unusual revelation that, "because of today’s unprecedented market conditions," the CFTC was six months into an investigation of U.S. oil markets, focusing largely on possible price manipulation.

The CFTC, FTC, SEC, FERC, and other agencies all have a role in monitoring and/or investigating price manipulation, and any time markets boom or bust regulators are likely to take notice. And high prices in oil and agriculture sectors very well may have been made even higher by market manipulators. However, the fact that agriculture prices are soaring at the same time crude oil prices are skyrocketing should be of little surprise.

It seems to me an awful lot of time is being spent “looking” for market manipulators instead of looking at the policies impacting the markets themselves. Ethanol mandates, increased worldwide demand for oil and food, and a falling dollar all are having more impact on the markets than are market manipulators.

I am all for catching cheaters, and I am confident there are more than a few, but I fear all this talk of market manipulation will artificially inflate the role of unscrupulous investors in causing the rise of high food and fuel prices when large-scale U.S. and global food and fuel policies should be under the microscope. I suppose, as usual, only time will tell.