Derivatives that track the price of traditional commodity futures are ‘parasitic’, according to Craig Donohue, CEO of Chicago-based CME Group, Financial Times reports. He added that pending U.S. rules limiting commodity speculation will urge banks and hedge funds to give up futures that call for physical delivery and transfer money into contracts that settle in cash.
The Commodity Futures Trading Commission is planning to allow traders to hold five times more cash-settled contracts than traditional futures contracts, as they did not also own more than a quarter of the deliverable supply for the underlying commodity. Higher limits will help ensure market liquidity and efficient price discovery.
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