From the CME website today:
"One of the farm leaders there said today that farmers will act in some unspecified way to limit trade in agricultural commodities to what is strictly necessary."
I had delayed writing this piece because I wanted to see if the threat was serious. I am now convinced that it is. The quote above is a follow-up to testimony before Congress last week by leaders of a few agricultural groups in which these groups tried to persuade Congress that they should eliminate the use of margins for all traders who don't provide or take delivery in the futures markets. They recommended to Congress that they should demand that market participants who don't provide or take delivery of products should be required to pay 100% up front to place a trade. 100%! In other words, they want to eliminate all leverage in the futures markets -- except for themselves! They want to ban everyone from the futures markets except hedgers and commercials! They want to ban you from the futures markets! Keep reading, because this has the potential to affect you even if you only buy stocks and Exchange Traded Funds because it will limit your investment choices!
Lest anyone think that this couldn't happen -- certainly not in America -- please keep in mind that the farm lobby is one of America's most powerful and most effective. They have used this power and influence in Washington to guarantee the most profitable and consistent tax-payer funded subsidies for decades. They even get paid from your taxes at times to not grow anything at all! Imagine! Wouldn't it be nice to be paid out of the pockets of the tax payers to not work?! Not many have achieved that status, but this group is so powerful that they have!
Now, the farm lobby wants to not only dig deep into your pockets for their own financial gain. They also want to limit market participants to just themselves. This selfish action needs to be nipped in the bud now, before it can gain any more traction. The CFTC, the Federal regulatory agency that oversees the futures industry, recently released a report debunking the absurd allegations of these farm groups. However, these groups don't care about the lack of factual basis for their absurd and false notions. They are pressing ahead with their erroneous self-interests, despite how it will hurt them in the long run.
Some traders may say, "Why should I care? I don't trade grains or softs!" But isn't it nice to have the availability of ETFs that trade commodities, like the famous gold, oil, and other Exchange Traded Funds? Do you want that option to be eliminated for you?
All traders should care because the same rules that will be imposed on grain traders and funds will almost certainly be imposed on traders in all futures, including treasuries, stocks, energies (crude oil), precious metals, etc. There is a provision in our government system of fairness called equal treatment under the law. This concept is a sword that cuts both ways. It both protects everyone, but it also brings an equal burden on everyone. If they can shut you out of the agricultural commodities markets, then it is a start down the slippery slope of shutting you out of other futures markets as well. Are you willing to run that risk?
All traders should care because the same rules that will be imposed on grain traders and funds will almost certainly be imposed on traders in all futures, including treasuries, stocks, energies (crude oil), precious metals, etc. There is a provision in our government system of fairness called equal treatment under the law. This concept is a sword that cuts both ways. It both protects everyone, but it also brings an equal burden on everyone. If they can shut you out of the agricultural commodities markets, then it is a start down the slippery slope of shutting you out of other futures markets as well. Are you willing to run that risk?
Furthermore, even if you currently don't trade agricultural commodities, wouldn't it be wise for you to at least keep the option open of doing so? If the farm lobby shuts down that option for you, then that is one less avenue for you as a professional. Wouldn't it be better to keep that option available to you? It would be wise to take the time to find the website of your Congressman and write them to let them know that this would not only hurt you and your family; it would hurt the financial markets, also, because it would limit liquidity and limit your options as a trader.
Furthermore, you might also mention to Congress that if they shut down the futures markets here in America, you may be forced to send your money overseas to other futures markets in other countries like Europe, China, Singapore, India, etc. All these countries also have active futures markets. This would make the United States less competitive with these other countries! That would not be beneficial for the health and vitality of the financial markets of the United States, would it? It would make the financial markets of this country less liquid, less open, and thus, less competitive. It would also very likely reduce your tax payments to the U.S. government if your income is derived more and more from overseas! In a time of greater global competition than ever before, and a stagnant economy with fewer jobs, that's the last thing the U.S. economy needs, isn't it?
Furthermore, you might also mention to Congress that if they shut down the futures markets here in America, you may be forced to send your money overseas to other futures markets in other countries like Europe, China, Singapore, India, etc. All these countries also have active futures markets. This would make the United States less competitive with these other countries! That would not be beneficial for the health and vitality of the financial markets of the United States, would it? It would make the financial markets of this country less liquid, less open, and thus, less competitive. It would also very likely reduce your tax payments to the U.S. government if your income is derived more and more from overseas! In a time of greater global competition than ever before, and a stagnant economy with fewer jobs, that's the last thing the U.S. economy needs, isn't it?
If you value your freedom to trade and participate in the financial markets, it is time to defend that freedom, or one of America's most powerful lobbies will take that freedom away from you!
I might also add that CFTC Commissioner Bart Chilton has already come out in opposition to this proposal from the farm lobby. He so testified before Congress in the same hearings as the farm lobbyists, and he issued the report from the CFTC that disputed and corrected the erroneous allegations of the agriculture groups who want to limit your freedoms! If the regulatory agency of the government is opposed to this nefarious plan of the farm lobby, then we have the strength of moral imperative on our side. Don't make the mistake of being apathetic on this issue!
It's time to write to Congress! Protect your livelihood, your investment options, and your freedom today!
It's time to write to Congress! Protect your livelihood, your investment options, and your freedom today!
