Proposals to ban large institutional investors from commodity markets being put forward in the US are misguided, as are similar ideas being discussed by some European politicians.
Institutional investors have deepened and enriched commodity markets, enabling producers and consumers to hedge more efficiently and far further in the future than ever before. Banning them or constraining their participation will only reduce liquidity and hurt market efficiency and won’t cure the problem of rising commodity prices.
Large institutional investors entering the market today are following the trend of rising commodity prices, not leading it.
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