AMERICAN TRUCKING ASSOCIATIONS

The Senate passed financial reform legislation conference report on July 15 that included provisions reforming derivatives trading. Named after Senate Banking Committee Chairman Christopher Dodd and House financial Services Committee chairman Barney Frank, the legislation ends a trend to ease regulations and instead clamps down on the financial industry. The House passed the conference report in June.

Within the 2,300-page legislation, and of interest to the trucking industry, is the reform of the derivatives markets, an area of trading that until now had escaped oversight by regulators.  The American Trucking Associations believes that excessive speculation in commodity derivative contracts contributed to dramatic price spikes in the price of crude oil.  For that reason, ATA supported the provisions of the legislation that increase oversight and transparency in the derivatives markets, and the establishment of aggregate position limits.

As a member of the Commodity Markets Oversight Coalition (CMOC), ATA actively engaged in the effort  to enact responsible legislation that protects legitimate commercial hedgers and consumers from excessive speculation and systemic risk and not create new loopholes for financial interests.  The coalition was especially supportive of the narrow exemption from mandatory clearing requirements for legitimate commercial end-users that use derivatives to manage risks associated with their businesses.

CMOC stated in a letter to Senate leadership in May that “financial entities, including hedge funds, investment banks and insurance companies, have begun to use commodity derivative contracts to hedge the risk of a declining dollar or rising interest rates. While these financial entities have a legitimate interest in hedging their risk, they are not producers, distributors or end-users of physical commodities.

ATA applauds Congress’s decision to curb excessive commodity speculation while protecting the ability of the trucking industry to hedge its exposure to increased fuel prices. The legislation will help ensure that fuel prices are linked to the market forces of supply and demand.