Is speculation good for commodity futures markets
The Forwards Market Commission and many analysts claim that speculators are different from gamblers since they do not create risk, but merely accept the risk which already exists in a futures market.
According to them, speculators try to assimilate all the possible price-sensitive information, on the basis of which they can expect to make profit. Therefore, it is claimed that the speculators contribute in improving the efficiency of price discovery function of the futures market.
Further, in the absence of strictly enforced guidelines classifying different categories of market participants, it is not an easy task for the market regulator to differentiate among speculators, gamblers and hedgers in commodity futures markets.
Commodity future calls in Market reviews and complaints
Consequently, it is difficult to determine whether a trader is buying/selling commodity futures contracts for purely speculative or gambling or hedging purposes? As witnessed in the case of the large commodity conglomerates, a hedger may also engage in futures trading for speculative purposes.
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