London Loophole

[txrandom]

What exactly is the London Loophole?

 

[ElFenix]

Originally posted by: txrandom
What exactly is the London Loophole?

i'm guessing it's that US traders can trade in london without any US restrictions applying. for that matter, anyone in the world can trade in london without US restrictions applying, so i'm not sure how effective 'closing' it might be.

i could be wrong.

 

[txrandom]

So basically they are taking advantage of less strict trading rules in the London Exchange that they can't take advantage of on the New York Mercantile Exchange? Is it that big of a problem? What advantages are they actually getting? I googled London Loophole, but all I found were articles about the Senate wanting to remove it.

 

[ElFenix]

something i found from a lyndon larouche site via google:

The "London loophole" is actually at least two. The CFTC, deferring to the British FSA as "its model," is allowing these banks and hedge funds to be designated "commercial" rather than "speculative" traders?as if they were airlines or gasoline distributors which needed to buy future oil products?and thus subject to no speculative limits on how large their positions. And second, with one-third or more of futures trading for West Texas crude oil going through British offshore "dark markets," no reporting of trades and speculative positions is going to any U.S. regulatory agency.

though, in the paragraph above what i quoted the article is claiming that banks are buying futures in oil and then taking delivery and withholding oil from the market which i find hard to believe.

 

[LegendKiller]

Originally posted by: ElFenix
something i found from a lyndon larouche site via google:

The "London loophole" is actually at least two. The CFTC, deferring to the British FSA as "its model," is allowing these banks and hedge funds to be designated "commercial" rather than "speculative" traders?as if they were airlines or gasoline distributors which needed to buy future oil products?and thus subject to no speculative limits on how large their positions. And second, with one-third or more of futures trading for West Texas crude oil going through British offshore "dark markets," no reporting of trades and speculative positions is going to any U.S. regulatory agency.

though, in the paragraph above what i quoted the article is claiming that banks are buying futures in oil and then taking delivery and withholding oil from the market which i find hard to believe.

There you have it.

I don't think the part of physical delivery is correct. Banks aren't about to put massive amounts of capital into oil and the whole idea is plain silly. That doesn't make the part of the loop incorrect.