STOCK MARKET WATCH -- Tuesday, 18 June 2013

[Demeter]

6. EU close to agreeing rules for insider trading in commodities

http://uk.reuters.com/article/2013/06/14/uk-commodity-regulations-idUKBRE95D0CE20130614

European authorities are close to agreeing on the final draft of markets abuse rules that will make the standard commodities market practice of trading on inside information illegal. Commodities market players say the draft regulation, which will lay the ground work for jail terms for insider trading, could force them to reveal their trading strategies and undermine their businesses. For centuries, traders have made money from their knowledge of shortages and surpluses of physical commodities, which they say enables them to play a vital role in balancing global markets.

"Applying insider trading to commodities is mad," said Craig Pirrong, University of Houston academic and commodities expert.

"It may make sense to prosecute the use of information illicitly obtained, (but) 'better information' does not mean 'inside information', and any attempt to apply insider trading concepts to commodities will sow confusion and wreak havoc."

Supporters of the regulation argue that some markets including European power markets have already successfully adapted to disclosure rules for insider trading, even though traders objected vociferously, and that other commodity markets will adapt too....