In theory, buyers benefit big time from price transparency

Jun 01, 2008 | 12:27 PM |

With futures trading promising to illuminate the shadowy world of steel price negotiations, consumers generally are supportive of the move to greater transparency.

That's not to say they're rushing to the ring to participate. There is some nervousness that the contracts could backfire and spark even greater volatility and price rallies. But even from the sidelines, many consumers see merit in steel futures.

"Ultimately it should help the market function better because anything that increases transparency and allows for hedging tends to lead to better market performance," said Bernard Markstein, senior economist and director of forecasting at the Washington-based National Association of Home Builders. "It is true in some situations you can introduce speculation that can lead to more volatility. But in most cases the introduction of futures markets, which allow for hedging, reduces volatility and overall improves the market, which is actually to the benefit of both the producer and the buyer."....