MEPs move to curb speculation with food prices
27.09.12 @ 09:47
BRUSSELS - The European Parliament has adopted a wish-list on rules for financial markets designed to curb food price speculation.
The EU law - which also looks to control sales of complex and risky financial products to naive customers - still has to be negotiated with member states.
But MEPs in the economics committee on Wednesday (26 September) unanimously adopted draft changes to the European Commission bill by German centre-right MEP Markus Ferber for stricter rules on the sector.
Before the vote, Ferber said in a press conference that if he gets a big majority it will give him a political mandate for talks with EU countries aimed at sealing a deal by the end of the year.
Among the MEPs' demands is a "speed limit" on so-called "high-frequency trading" - software which buys and sells millions of shares per second based on small variations in prices.
If the parliament's proposal goes through, computers will not be able to trade shares faster than at a rate of 500 milliseconds per transaction so that orders are valid for at least that long.
Clear trading rules for complex financial products such as derivatives or bundled loans will also be put in place.
Lack of clarity over how many complex products were held by banks and investment funds in the 2008 bank crisis showcased the dangers of the status quo, which has seen taxpayers in several EU countries bail out "too big to fail" banks with billions of public money.
MEPs also want to ban local authorities from buying and selling complex products which they do not understand.
"In my country a number of local authorities are now bankrupt because of such speculation ... We want to protect taxpayers, not those who abuse markets," Ferber said.
One tricky part of the new regime is how to regulate trade in food products and derivatives (bets) on food prices, which have seen food prices spike across the globe in recent years.
MEPs envisage caps on how much an individual broker can trade over a specific period of time.
But development NGOs are unimpressed, saying the Ferber blueprint leaves too much room for traders to keep profiteering on the misery of hungry people in developing regions.
"The text adopted today by the economic affairs committee contains dangerous loopholes: an overly narrow definition of the limits to be imposed on speculation and generous exemption clauses excusing some companies from regulation," Christine Haigh, from the World Development Movement, a London-based NGO, said.