China’s Commodity Trading Volume Declines in First Two Months

Bloomberg

Commodity futures trading volume in China dropped 21 percent in the first two months of this year, led by contracts on the Shanghai Futures Exchange, according to data provided by the China Futures Association.

Total volume on the Dalian Commodity Exchange, Zhengzhou Commodity Exchange and the Shanghai bourse reached 39.68 million lots in January and February, compared with 50.53 million lots a year earlier. In Shanghai, where copper and gold futures are traded, volume fell 52 percent from a year earlier to 34.37 million lots.

About 3.42 million lots of copper contracts were traded in the first two months of 2011, 56 percent less than a year ago, while aluminum volume declined 80 percent to 960,206 lots, the association said in an e-mailed statement.

The association started to provide volume figures, with trades counted as one lot, from this year. Previously each trade was counted twice, including the buyer and seller.

–Helen Sun. Editors: Richard Dobson, Matthew Oakley

Senator wants SEC, CFTC funds in budget

By Kevin Drawbaugh

WASHINGTON (Reuters) – The chairman of the Senate’s securities subcommittee said he will insist on adequate funding for financial regulatory agencies as a pre-condition for a federal budget deal.

“I’m certainly advocating that. I can’t speak for all of my colleagues, but I think we have to make the case publicly that this is one of those issues which is central to the way markets operate,” Democratic Senator Jack Reed told the Reuters Future Face of Finance Summit on Tuesday.

U.S. House of Representatives Republicans, aiming to combat the federal deficit and roll back policies they oppose, are trying to restrain funding for the Commodity Futures Trading Commission and the Securities and Exchange Commission.

Both agencies say they need more money and staff to implement scores of new rules mandated under last year’s Dodd-Frank Wall Street reform law, approved in response to the economically devastating 2007-2009 financial crisis.

Funding for the two agencies hinges on the outcome of a partisan dispute over the deficit-laden federal budget. The House was expected to vote later on Tuesday on a temporary budget measure that will allow further negotiations.

If a short-term budget agreement is not reached soon, the government will run out of money on Friday and some nonessential services will stop. Both Republicans and Democrats have inched back in recent days from a shutdown.

“Shutting down the government at this point would not be helpful,” Reed said. “We have huge instability in the world. North Africa is transforming itself as we speak … You’ve got oil prices that are sensitive. So the shock of a shutdown in the U.S. government could have unintended consequences that are staggering in terms of market reaction” and more widely.

He also cited recent studies that say the deep spending cuts sought by House Republicans would destroy hundreds of thousands of jobs and damage the fragile economic recovery.

“If the goal is to put people back to work and get the economy going, this is not the best plan that they’ve proposed. I hope they recognize that,” Reed said.

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Budget Rift at CFTC Pulls Plug on Alarm Budget Rift at CFTC Pulls Plug on Alarm

By JEAN EAGLESHAM And VICTORIA MCGRANE

The Commodity Futures Trading Commission has halted development of a technology program used to flag suspicious trading because of an $11 million cut in its technology budget, increasing rancor within the small agency about how it should spend its money.

The funding shortfall is forcing Republicans and Democrats in the CFTC to advocate competing visions of the future of the agency, established in 1974 to police trading of oil, natural gas, silver and other commodities in the $40 trillion futures market.

Scott O’Malia, a Republican commissioner, favors big investments in technology. Democrats, led by CFTC chairman Gary Gensler, would rather use funds to increase staff by 46%.

Continue reading here.

Seeking better-defined trading rules

From Bloomberg:

The U.S. Commodity Futures Trading Commission proposed derivatives market guidelines designed to help define trading practices such as “spoofing” and “banging the close” that are prohibited under the Dodd-Frank Act.

CFTC commissioners voted 4-1 today to seek comment on measures they say would provide greater detail about practices that violate bids or offers, or show “intentional or reckless disregard” for orderly transactions during a closing period.

The Dodd-Frank Act, the regulatory overhaul enacted in July, bans spoofing, in which a trader enters a bid or offer with the intent of canceling the transaction before it is carried out. The law also targets “banging the close,” in which traders attempt to affect a settlement price by buying or selling large volumes just before the day’s end of business.