Commodity Online
CHICAGO: CME Group, the world's largest and most diverse derivatives exchange, disagreeging with the findings of the Permanent Subcommittee on Investigations’ Report on CBOT Wheat Futures contract said that indepth market study by market regulator, CFTC, GAO, Informa and CME Group had established the fact that speculation was not responsible for volatility in prices.

"CME Group applauds government efforts to ensure effective regulation of commodity futures markets. Nevertheless, we disagree with the findings and recommendations in the Subcommittee Report, which is based on anecdotal information versus sound empirical and economic analysis. The Subcommittee Report is contradicted by four separate studies conducted by The Commodity Futures Trading Commission ("CFTC"), the Government Accountability Office ("GAO"), Informa Economics Inc. ("Informa") and CME Group - all of which concluded that there is no causality between market participation of index funds and non-commercial traders and wheat price levels or cash market convergence at expiration.


The CFTC, the GAO, Informa, and CME Group, all used in-depth market data to analyze how changes in the positions of index funds and other market participants are related to price changes, as well as the price differential between wheat cash and futures prices. Each study concluded that fundamental supply and demand factors related to crop failures, strong economic growth in many importing nations, acreage switching caused by demand for bio-fuels, and currency volatility have all been responsible for recent periods of increased volatility and price swings in commodity markets.

CME Group is committed to working with regulators and government officials to ensure the effective functioning of our markets, as well as the ability of all market users to access our markets on a non-discriminatory basis for bona fide investing and portfolio management purposes.

CME Group, along with the CFTC and broader industry participants, have developed a number of steps to address convergence issues in the Wheat contract, including implementing seasonal storage rates, additional delivery territories, and reduced vomitoxin levels. These changes, which are being implemented beginning with the July 2009 contract, are expected to improve convergence between cash and futures prices," the press release added.

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