The Senate Permanent Subcommittee on Investigations concluded in its report on Excessive Speculation in the Natural Gas Markets that excessive speculation contributed to rising energy prices and that gaps in the available market data made it difficult for the Commodity Futures Trading Commission (CFTC) to quantify the affect of that speculation. The subcommittee zeroed in on the ability of failed hedge fund Amaranth Advisors to move positions from the New York Mercantile Exchange (Nymex) to the Intercontinental Exchange (ICE) when asked by Nymex to reduce its excessive natural gas position (see “Manipulating a hedge fund blow-up,” page 66) and recommended requiring ICE to meet the same reporting requirements as Nymex.
While CFTC Acting Chairman Walt Lukken, in testimony before the subcommittee, did not agree with all of its conclusions, he did acknowledge that “regulated futures markets and exempt commercial markets have become increasingly linked.” A month later the CFTC announced that it would hold hearings on Sept. 18 examining the oversight of trading on regulated futures exchanges and Exempt Commercial Markets. The hearing will focus on the tiered approach of the Commodity Futures Modernization Act of 2000.
“The evolution of these energy markets in recent years requires our agency to address whether the level of regulatory oversight is proper,” noted Lukken in the announcement.
In his testimony, Nymex president and CEO and former CFTC Chairman Jim Newsome stated that the CFTC should be given additional regulatory authority to monitor aggregate positions on both ICE and Nymex.
