The project builds on the international attention on the matters of commodity market volatility and its impact on development to facilitate a larger public-private discussion on the impact of financial trading in commodity derivatives. The objective of the project is development of a voluntary code of behavior for derivative traders.
During the UN High Level Thematic Debate on commodity market volatility a point was raised that international organizations should make an effort to engage with commodity traders and increase their awareness of the relevant development issues and concerns of global community. This will facilitate a dialogue with larger market participants who can formulate a group action to respond to the public concerns about market volatility. The concentration of commodity derivative markets in the hands of few large traders makes it possible to collect a critical mass of influential people around the issues of social responsibility of derivative traders.
The private and public sector parties essentially agree that the socioeconomic impact of commodity market volatility must be addressed. Nevertheless, the views on effective measures to mitigate the problem differ very considerably, and the lack of common understanding of key underlying issues prevents effective joint action. This gap calls for a dialogue to reach agreement on issues of common interest to mitigate commodity market volatility and its costs, as well as to channel financial capital into investments into physical production capacities for commodities of high socioeconomic significance for CDDCs.
The Public-Private Initiative (PPI) on Commodity Market Volatility is an effort to open such dialogue, and is supported by five major international banks active in commodity trading, with a further two banks interested to join, as well as by the Common Fund for Commodities, and UN agencies with mandates touching on commodities and development.
The project would support the emergence of a “centre of gravity” in discussions on the adverse impact of commodity derivative trading, drawing from the voluntary interest of the private sector to respond positively and transparently to the negative public perception of the rise in commodity market volatility and its negative impact on developing countries.
The first meeting of the PPI on Commodity Market Volatility took place in New York at UN Headquarters on 25 September 2012, facilitated by De Novo Agricultura. The agreed outcomes of the meeting point strongly to the need for modernised agenda of action in commodity sector, including research on newly emerging issues, effective and feasible practical actions, and better communications.