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House bill calls for CFTC to review metals warehouse oversight
June 23, 2014 / 9:50 PM / 3 years ago

House bill calls for CFTC to review metals warehouse oversight

WASHINGTON, June 23 (Reuters) - The U.S. commodities regulator will have to carry out a review of metals warehousing if a bill before the U.S. House of Representatives is passed, the latest sign of intensive political pressure in the United States over the controversy at the London Metal Exchange.

Representative Bob Goodlatte, who chairs the House Judiciary Committee, urged the CFTC to take a tougher stance on the London Metal Exchange when the House Committee on Agriculture in April approved a bill reauthorizing the agency’s mandate.

The LME is struggling to resolve a years-long controversy after complaints from brewers - who use aluminum for beer cans - and other companies that excessive stockpiling by Wall Street banks was inflating prices.

The text of the bill has now been amended to include Goodlatte’s request for a study by the CFTC on how it oversees metals markets, specifically to compare the rules for foreign and domestic exchanges.

The fact that the legislation addresses the issue shows the continuing pressure on the warehousing business by politicians, even if the bill stands little chance of making it through Congress against opposition from President Barack Obama.

The LME is regulated in Britain by the UK’s Financial Conduct Authority, while the CFTC holds sway over its U.S. business.

The LME has largely been exempt from the CFTC’s rules since 2001 but is now seeking to register with the agency as a so-called foreign board of trade.

The House is scheduled to discuss the bill late on Monday, and to vote on it a day later.

Complaints of inflated prices, which have plagued the industry for years, captured public and political attention last year, with much of the charge led by Senator Sherrod Brown, an Ohio Democrat critical of large banks. (Reporting by Douwe Miedema)

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