“Excessive speculation” in commodities derivatives markets: Boundary work around acceptable versus non acceptable practices

Adopting an historical perspective, we propose to study the way recurrent debates regarding the "excessive speculation" category on financial derivatives markets, take various shapes at different points in time. We consider that history does not repeat itself, at least not in the exact way. However, many of the issues faced by markets regarding speculation are not entirely new. More specifically, we will analyse, at two different points in time, how actors combine justifications to impact on the frontier between moral and immoral behaviours and undertake work and efforts to define the boundaries between acceptable versus non-acceptable practices. Then, we will look at the consequences on market shaping. We focus on commodities derivatives markets with special emphasis on agricultural markets. As these markets bear a direct link with the feeding of people, their history is characterized by recurrent struggles involving moral as well as technical issues between a diversity of actors (farmers, politicians, agribusiness firms, commodity traders, activists, academics…) acting on the basis of different worldviews. The most persistent feature of the controversy lies in the role of speculation, sometimes seen as beneficial to the functioning of the market, sometimes stigmatized as responsible for major food crisis. Although the notion first appeared in the wake of the 1929 crisis, and played a structuring role in the regulation of commodities futures markets at that time, categorizing transactions on markets as excessively speculative proved to be both crucial in the functioning of the market and particularly uneasy. In this project, we will study the controversy around the definition and the role of "excessive speculation" within two major parliamentary debates involved by regulatory issues: the Commodity Exchange Act in 1936 and the MiFID2 in 2011. An interesting question raised by the recurrent apparition of the "excessive speculation" category in debates regarding the desirable level of regulation of financial commodities markets in the US and in Europe is the leeway, left to both opponents and advocates, by the ambiguity of the notion. We propose to study how actors handle this ambiguity and work on the boundaries of the category, in their attempt to define what is permissible and what is not on commodities derivatives markets over time. We argue that the analysis of the structure of the debates at two different periods might reveal on the persistent mechanisms relating categories, the evolution (or stability) of power relations and their consequences on organizational forms of markets. Methodologically, we rely on many types of official documents, and specifically on parliamentary reports, congressional hearings (1934-1936) and history books, in order to analyze the debates about the 1936 regulation. Recent reports by NGOs on commodity derivatives constitute another source of data to analyze the present regulation wave, where resistance against "excessive speculation" is explicitly expressed and proposals to set limits on commodity speculation are put forward. We also analyze contributions to the public consultation organized by the European Commission in a document concerning the review of the Markets in Financial Instruments Directive (MiFID) from 08/12/2010 to 02/02/2011. Close analysis of the responses provides interesting results, particularly as regards the controversies around the definition of "excessive speculation" and the discourses used for that purpose.