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Leesburg, Ohio | There is not now, nor has there ever been, any requirement to actually possess a commodity, in order to trade commodity futures. Nor should there be. There is, obviously, a very tight requirement for financial capacity to "make good on" the results of a futures contract, and that happens on a daily schedule if you participate in the futures market.
As a futures market user, I do not care in the least about whether the person offsetting my contract actually has the commodity. I only care that his/her account has the financial backing to stand behind the purchase or sale, no matter where the market price goes each day, every day, until I offset my position.
I assume you do acknowledge, of course, that a futures contract is NOT the cash commodity, but rather the PROMISE of delivery at some future point in time, of the underlying commodity.
It is the very participation of parties unrelated to the direct cash commodity that makes for better, smoother, price discovery and market functionality. Without the speculators/day-traders/arbitragers, we as producers and end-users would MORE EXPOSED, not less exposed, to the very actions of someone getting a "corner" on the market, and being able to distort the market price for their own benefit. These middlemen have the opportunity to insert themselves in trades that take advantage of markets that are "out of position", thereby holding at bay anyone who might otherwise be able to take advantage of hedgers (either long or short) in a thinner market.
I do not wish to put anyone here in a bad light...we all have to learn sometime, and I certainly do not have all the answers, but I respectfully suggest you study up on how futures markets work, and their purpose, before suggesting they be dismantled. | |
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Board of trade hater's what is your suggestion?
