John Damgard, chairman of the Futures Industry Association, has told a US Congressional agriculture committee that imposing speculative position limits in derivative markets should be kept as a means “to prevent congestion or squeezes in physically-delivered contracts during the delivery period”.
That would be a very modest use of position limits that would not amount to an attempt to tackle the perceived problem of excessive speculation, which some believe has pushed commodity prices, notably for energy, into an unprecedented spike and crash.
“FIA also does not understand position limits to have ever been a cure for higher prices or lower prices,” Damgard said. “Instead, position limits have always played an important role to prevent congestion or squeezes in physically-delivered contracts during the delivery period. FIA would expect the Commission to use its new standby position limit authority consistent with this unassailable role for position limits.”
Moreover, Damgard argued, as under...