UK

High Court Sheds Light On Regulatory Treatment of Commodity Trading

Joanna Gray, University of Strathclyde

Financial and commodity derivatives often receive a bad press due to the balance sheet damage they can do when their trading goes awry (Barings, Allied Irish and Sumitomo to name but a few). Instruments that have been devised to unbundled and manage risk obviously need careful and expert handling but of course the very existence of liquid and well developed derivatives markets is a great boon to ultimate users and producers of the underlying commodity around which the derivatives instrument is structured. Indeed in the hands of such users they are risk minimisers and are and have long been used as hedging instruments.