Pending changes to regulation of the commodities markets will drain liquidity, particularly in softs, and could drive business to other jurisdictions, the managing director of commodities consultancy Contango Markets said Wednesday. "Liquidity in commodities, especially the softs markets, was woeful in the 1980s; if increased regulation means we lose the liquidity that those markets have built since then, we'll start to see increased volatility," Clive Furness said. "That can't be good for anyone, not because of the loss of speculators, but because there isn't the liquidity to keep market stable." Mr. Furness said liquidity is already falling as banks step back from futures and into physical commodities. "It'll hit softs and agricultural commodities more than metals and energy, and I fear for those markets if this happens," he added.
Sunday, July 1, 2012
Softs to Suffer as Regulation Drains Liquidity
Pending changes to regulation of the commodities markets will drain liquidity, particularly in softs, and could drive business to other jurisdictions, the managing director of commodities consultancy Contango Markets said Wednesday. "Liquidity in commodities, especially the softs markets, was woeful in the 1980s; if increased regulation means we lose the liquidity that those markets have built since then, we'll start to see increased volatility," Clive Furness said. "That can't be good for anyone, not because of the loss of speculators, but because there isn't the liquidity to keep market stable." Mr. Furness said liquidity is already falling as banks step back from futures and into physical commodities. "It'll hit softs and agricultural commodities more than metals and energy, and I fear for those markets if this happens," he added.
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