Oil's tense trading scene may sway a move to Dubai
Hedge funds are relocating to Duabi, Hong Kong, Singapore, Shanghai..Headquarters for the New World Order..
Oil's tense trading scene may sway a move to Dubai
Futures launch may help traders escape from U.S. regulators' watchful eye
http://www.marketwatch.com/story/oil...-move-to-dubai
SAN FRANCISCO (MarketWatch) -- The Dubai Gold & Commodities Exchange will launch trading of crude-oil futures on Tuesday, a timely move given the astronomical prices for oil and talk of U.S. regulation of speculators in the commodity markets.
Prices for crude peaked above $135 a barrel Thursday in electronic trading on the Chicago Mercantile Exchange Globex platform. See Futures Movers. Record prices over the past several months have raised questions over manipulation of the market.
A U.S. Senate panel listened to testimony on May 20 that said financial speculation by institutional investors and hedge funds in the commodity markets are contributing to energy and food inflation. See full story.
"The regulatory environment is becoming so undesirable to foreign and domestic funds that they have no choice but to go offshore," said Kevin Kerr, president of Kerr Trading International and editor of MarketWatch's Global Resources Trader.
Speculative activity in commodity markets has grown "enormously" over the past several years, the Homeland Security and Governmental Affairs Committee said in a news release. It pointed out that in five years, from 2003 to 2008, investment in the index funds tied to commodities has grown by 20-fold -- to $260 billion from $13 billion.
The growth offers "justifiable concerns that speculative demand, divorced from the market realities, is driving food and energy price inflation and causing human suffering," HSGAC said.
"If Congress makes some laws that reign in speculation, it's possible that speculators will move out of the U.S. markets and into Dubai," said Phil Flynn, a vice president at Alaron Trading.
Running for cover
The backlog of cases for National Futures Association has been growing, said Kerr. The NFA is a provider of regulatory programs that safeguard the integrity of the derivatives markets.
"Understaffed and overworked, the regulatory industry has decided to throw the baby out with the bathwater and meanwhile, legislators who are also fearing job loss have decided to blame the speculators and create some sort of witch hunt," said Kerr.
Speakers testifying at the HSGAC hearing Tuesday called on the Commodity Futures Trading Commission to better monitor the market and to take action.
"The people of America are about to take up pitchforks, and we are feeling the heat in Congress," Sen. Mary Landrieu, D-La., said during the hearing, according to Platts, a global energy information provider. "It does not appear that our cop on the beat feels the heat like we do."
Given what some may consider a hostile environment for futures trading, investors may look elsewhere to ease the restraints.
And "in today's global trading market, the U.S. is far from the only place to do business," said Kerr. "If this environment keeps up, more and more hedge funds will flee for more friendly shores."
Fair thee well
Indeed, the concept of a fresh choice may be appealing to traders.
The Dubai Gold and Commodities Exchange (DGCX) will launch trading for West Texas Intermediate and Brent crudes under the tickers DWTI and DBRC and they'll trade from 8:30 a.m. to 11:30 p.m. local Dubai time.
And it could be "huge competition for ICE," said Kerr.
