Commissioner Bart Chilton: Price Discovery In The Commodities Markets

from Peak Prosperity The commodity markets impact almost everybody on the planet, every single day, because some derivative or variant of about everything that they consume is impacted by those prices. Whether it’s a home loan, or a piece of jewelry, or a fill up at the gas station, or a gallon of milk, or a loaf of bread — commodity pricing is vastly more important than most people actually realize. ~ Former CFTC Commissioner Bart Chilton In theory, regulation is supposed to set and enforce the rules of the game that market participants play by, in order to ensure that price discovery remains efficient, effective — and most important — fair. In practice, there’s plenty of debate to be had on how successful our regulators are in effecting their mission. And one investment class in particular, commodities, frequently comes under criticism for questionable price action. So, this week we talk with Bart Chilton, former Commissioner of the Commodity Futures Trading Commission (CFTC), about price discovery within the commodity markets, and whether investors can have confidence in the “fairness” of the current system. Perhaps it will come as little surprise that Commissioner Chilton, a longtime inside player, does not see the current environment as ‘broken’ or ‘unfair’, as some critics claim. And as a former regulator, there are certain topics he is not allowed to comment on. But that said, he’s a vocal advocate for several reforms that he believes will reduce the chances for manipulation within the market — particularly position size limits and better rules for high-frequency trading (HFT) algorithms: Continue Reading>>>

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