Reuters, John O'Donnell and Charlie Dunmore
French President Nicolas Sarkozy called for tighter controls on the speculators he blames for spiralling food and energy prices, spelling out reforms to put more trading under the thumb of regulators.
Sarkozy, head of the G20 group of the world's leading economies, said he wants to extend the use of cash deposits to all derivative deals, not just those on formal exchanges as is the current practice.
The French president's proposals are designed to rally support throughout the European Union support for a regulatory crackdown on speculating on commodities from oil to grain.
"Following the United States and Europe, all G20 countries should commit themselves to this way forward," said Sarkozy, drawing parallels between regulating against financial speculation and combating the mafia.
If successful, Sarkozy's proposals would widen the international scope for regulating commodities to include both trading of actual raw materials and informal over-the-counter deals which are not recorded centrally, experts said.
"This is a much broader ambit for regulating," said Edmund Parker, a derivatives specialist at law firm Mayer Brown, saying that compulsory cash deposits would make trading more expensive.
Sarkozy also proposed giving regulators the clout to stop market malpractice, allowing them to impose position limits that would cap the size of individual trades.
He added that highly complex derivatives should be standardised, and listed on markets or platforms where they can be closely watched by regulators.
Michel Barnier, Sarkozy's political ally who is in charge of EU regulatory reform at the European Commission, announced later on Tuesday that he would allow watchdogs to impose position limits restricting the size of individual trades.
His remarks won praise from regulators at the U.S. Commodity Futures Trading Commission, who said the French president had "got it exactly right."