June 14, 2011 / 11:16 AM / 9 years ago

UPDATE 3-Sarkozy demands crackdown on commodity speculators

 * France wants cash deposits, position limits for traders
 * Sarkozy demands regulators get clout to punish abuse
 * EU's Barroso lends support, Barnier vows trading curbs
 (Adds Barnier comment)
 By John O'Donnell and Charlie Dunmore
 BRUSSELS, June 14 (Reuters) - French President Nicolas
Sarkozy called for tighter controls on the speculators he
blames for spiralling food and energy prices, spelling out
reforms to put more trading under the thumb of regulators.
 Sarkozy, head of the G20 group of the world's leading
economies, said he wants to extend the use of cash deposits to
all derivative deals, not just those on formal exchanges as is
current practice.
 The French president's proposals are designed to rally
support throughout the European Union support for a regulatory
crackdown on speculating on commodities from oil to grain.
 "Following the United States and Europe, all G20 countries
should commit themselves to this way forward," said Sarkozy,
drawing parallels between regulating against financial
speculation and combating the mafia.
 If successful, Sarkozy's proposals would widen the
international scope for regulating commodities to include both
trading of actual raw materials and informal over-the-counter
deals which are not recorded centrally, experts said.
 "This is a much broader ambit for regulating," said Edmund
Parker, a derivatives specialist at law firm Mayer Brown,
saying that compulsory cash deposits would make trading more
expensive.
 MORE CLOUT
 Sarkozy also proposed giving regulators the clout to stop
market malpractice, allowing them to impose position limits
that would cap the size of individual trades.
 He added that highly complex derivatives should be
standardised, and listed on markets or platforms where they can
be closely watched by regulators.
 Michel Barnier, Sarkozy's political ally who is in charge
of EU regulatory reform at the European Commission, announced
later on Tuesday that he would allow watchdogs to impose
position limits restricting the size of individual trades.
 That would take Brussels closer to Washington but still
falls short of the more hard-line approach there which imposes
permanent caps on the size of individual trades.
 "We must be in a position to know not only the exact state
of stocks and demand ... but also the identity of the parties
to a given transaction," Sarkozy said.
 Speaking at the same event, European Commission President
Jose Manuel Barroso lent his support.
 "We are touching on a problem which is likely to become
vital," said Barroso.
 The European Commission will draft the first version of
laws to control derivatives markets later this year.
 Sarkozy's appearance in Brussels to comment on issues of
financial regulation is rare and he will hope it builds
momentum for a process of reform which many EU officials fear
is flagging.
 He has the backing of Germany but will struggle to win
support in Britain, home to Europe's top financial centre.
 "It's an extremely important signal from France to the
Commission," said Karel Lannoo of the Centre for European
Policy Studies, a Brussels think tank, adding, however, that
the chances for a global deal were far less certain.
 Although Sarkozy argued the case for protecting, as he put
it, the Ivory Coast peasant producing cocoa, many in London
will see his campaign as an attempt to protect French farmers
and undermine London, Europe's top centre for trading
derivatives.
 France is using its G20 presidency this year to try to
tackle rising prices for commodities such as grain, which it
says have triggered social unrest in North Africa and the
Middle East and fuelled inflation elsewhere.
 But with countries like Britain opposed to plans allowing
watchdogs impose caps on trades, Sarkozy may struggle to build
global agreement.
 The United States, on the other hand, which has urged the
EU and others to follow it in tightening rules on derivatives
trading, will be pleased with his tougher line.
 His remarks won praise from regulators at the U.S.
Commodity Futures Trading Commission, who said the French
president had "got it exactly right."
 (Additional reporting by Huw Jones in London)
 (Editing by Eric Onstad and Geert De Clercq)



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