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CME Group disputes Senate Subcommittee report

A report from the Senate Permanent Subcommittee on Investigations on index fund involvement in wheat futures trade is drawing fire from the CME Group, the owner of the Chicago Board of Trade and Chicago Mercantile Exchange.

The Subcommittee came to the conclusion that in 2008, index fund traders artificially inflated prices through speculative buying, disrupted convergence between cash and futures prices and caused undue stress to farmers, consumers and grain elevators and processors.

However – the CME Group states that the Subcommittee’s findings were based on anecdotal evidence not actual analysis, adding the findings are disputed by studies from the CME Group, the Commodity Futures Trading Commission, the Government Accountability Office and Informa Economics.

That study concluded that the sharp rise in price was due to crop failure, increased demand from developing nations, acreage switching linked to bio-fuel demand and volatility in the currency market.

According to Brownfield Analyst David Kohli, the Subcommittee study could lead to increased regulation of index fund involvement in futures trade by the government.

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