From the April 01, 2007 issue of Futures Magazine • Subscribe!

Push OTC energy bill

Senator Dianne Feinstein (D-Calif.) is making another run at increasing the regulation of energy derivatives trading. On Feb. 13, Feinstein re-introduced legislation aimed at preventing manipulation and fraud in OTC energy markets such as oil, natural gas, coal and electricity. Nine other members of the Senate have co-sponsored the bill.

The bill, S. 577, would amend the Commodity Exchange Act to require traders to report large positions in OTC energy markets and keep records of their transactions for five years or longer. The bill also calls for traders to give the Commodity Futures Trading Commission (CFTC) access to the records if asked. The bill has been referred to the Senate Agriculture Committee.

Specifically, the bill would require U.S. energy traders who electronically trade futures in the United States to keep records and report large positions carried by their market participants in energy commodities for five years or longer; require traders to provide such records to the CFTC or the Justice Department upon request, which are the same reporting requirements for New York Mercantile Exchange traders; and require U.S. traders who trade U.S. energy commodities delivered in the United States on non U.S. futures exchanges to keep similar records and report large trades.

“The integrity of the markets where futures of oil and natural gas are traded has never been more important,” Senator Feinstein said in a statement. “But we’ve learned the hard way from cases like Enron and Amaranth that the federal agency tasked with oversight in these markets — the CFTC — lacks the tools to detect and prevent manipulation and fraud. Meanwhile, consumers are forced to foot the bill while oil companies and traders only get richer. The time has come to require record-keeping and an audit trail that will shine light on energy market trading.”

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