After speaking with Jim McTague at the Milken Institute’s Global Conference about his book Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market into a Casino, it became clear to me that Gary Gensler is more concerned with one-upping Mary Shapiro and garnering all the attention and political capital he can grab.
The CFTC has had all the time in the world to put the rules into place and they haven’t. That means that the Lobbyists are probably hard at work while Gensler and his croonies are doing what they do best: jawbone to an ignorant public, and sometimes, ignorant press.
I read a Bloomberg article last week called Oil Speculation Curbs Would Aid Market Diversity that re-affirmed what Jim and I spoke about at Milken.
“The CFTC plans later this month to publish historical data on changes in positions in the futures market, he said. As much as 80 percent of volume in some futures markets is conducted by day trading or a type of trade known as a calendar spread, he said.”
“This means that only about 20 percent or less of the trading is done by traders who bring a longer-term perspective to the market on the price of the commodity,” Gensler said.
Wow. Calendar spreads are long-term by nature…the term “calendar” should give it away, Spreading is not a form of day trading either. Spreads are concurrent long and short positions that you can hold for weeks or months. Spreads bring a long term and seasonal understanding to the commodity markets and they certainly are for advanced or professional traders and investors.
Trading curbs are not going to change anything. Like water, capitalism will find it’s own level. The Socialists can dodge and weave, but they’ll never stop me or anyone else from trading. There are trading position limits in place. No one can force an investor nor a hedger into the marketplace.
Historically, less that 2% of all contracts are delivered against. They are offset before delivery takes place.