France Proposes EU Commodity Regulator, Seeks Raw-Material Position Limits

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31 Aug 2010

France asked the European Union to consider creating a new commodity regulator and setting position limits in raw-material markets, laying the groundwork for its presidency of the Group of 20 next year France takes “effective regulation of all financial markets very seriously and will make this a priority,” Finance Minister Christine Lagarde, Energy Minister Jean-Louis Borloo and Agriculture Minister Bruno Le Maire said today in a letter to the European Commission. “We consider European regulation of trading in commodity derivatives to be insufficient.”
The request, a copy of which was handed to journalists in Paris as it was sent to the commission in Brussels, underlines President Nicolas Sarkozy’s determination to step up oversight for markets ranging from cocoa to oil as he prepares to take over the presidency of the G-20 at the end of the year.
The surge in crude oil prices to more than $145 a barrel in mid-2008 is among the examples where speculation contributed to higher costs and helped tip the economy into a recession in the following months, French Finance Ministry officials told journalists today.
Commodity-price swings have been on the G-20’s agenda since last September, when the group’s leaders agreed to “improve the regulation, functioning and transparency of financial and commodity markets to address excessive commodity-price volatility.” Today’s initiative represents an attempt to flesh out those goals.
The proposals include a call for the standardization of position limits for commodity markets to prevent market manipulation and to reduce macro-economic risks.
The French also suggested that the 27-nation EU should create a new commodity market watchdog similar to the Commodity Futures Trading Commission of the U.S. or give powers over raw- material markets to existing European regulators, a Finance Ministry official said.

Source: Bloomberg