Increased energy market supervision; CFTC regulation

There is an interesting story by Reuters about how the Commodity Futures Trading Commission (CFTC) and the U.K’s Financial Services Authority (FSA) have announced they will closely moniter energy markets.

The story also details some of the CFTC’s plans to tighten commodity trading rules, including position limits in U.S. futures markets and sujecting more  over-the-counter derivatives subject to mandatory clearing.

Under the proposal, the  CFCT and FSA will:

  • increase information sharing and cooperation in surveillance of oil markets
  • enhance direct access rights to trade execution and audit trail data
  • share exchange regulations and disciplinary notices.

The story includes comment from CFTC chairman Gary Gensler:

WASHINGTON (Reuters) – U.S. and U.K. regulators moved on Thursday to increase supervision of energy markets while Washington also detailed new initiatives to tighten the rules in commodities trading.

The Commodity Futures Trading Commission and the U.K. Financial Services Authority announced the steps, which include closer auditing and mutual on-site visits of exchange operators, to gain a better view of trading in U.S. oil futures on the IntercontinentalExchange’s (ICE.N) London exchange. READ MORE

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Recap of first CFTC hearing into speculation

Commodify Me! has been busy with the daily grind of life and would like to apologise for not posting this sooner.

Anyway, as we all know, the Commodities Futures Trading Commission held the first of its three hearings last week looking at ways to curb excessive speculation in oil, gas and other engery markets.

The New York Times provides a nice summary of the first day’s proceedings:

The country’s top regulator of commodity markets said Tuesday that the government should “seriously consider” strict limits on the trades of purely financial investors in the futures markets for oil, natural gas and other energy products.  READ HERE.

And CNNMoney.com provides a summary of day two:

Commodity Futures Trading Commission Chairman Gary Gensler sounded even more convinced Wednesday that trading limits must be imposed on speculative energy traders, and he found support from two of the biggest financial players in commodities markets.”No longer must we debate the issue of whether or not to set position limits,” Gensler said during the second day of CFTC hearings on excessive speculation in the energy markets. He added that the only remaining questions are how to go about it. READ MORE.

CNNMoney.com also has comments from big commodity players, Goldman Sachs and JPMorgan Chase, both of who had representatives speak at the hearings:

JPMorgan Chase & Co. (JPM) came out in favor of position limits both on and off exchanges in a hearing before the Commodity Futures Trading Commission on Wednesday.But the bank wants exemptions maintained for swap dealers that help commodity end users buy and sell derivatives to reduce their exposure to price fluctuations. JPMorgan’s views closely matched those of Goldman Sachs Group Inc. (GS), which also had a representative at the hearing. READ MORE.

You might also like to read the Seattle Times and the Houston Chronicle.

U.S. Senator takes aim at commodity index traders

The Maine Public Broadcasting Network has a brief story about U.S. Senator Susan Collins telling the Commodity Futures Trading Commission (CFTC) chair Gary Gensler that index traders are distorting markets for wheat, oil and other commodities.

Collins has introduced the Commodity Speculation Reform Act, which would limit the number of contracts that non-commercial investors could hold in any one commodity market. READ HERE.

 

Senate probe finds excessive speculation in wheat markets

A story by Reuters about a U.S. Senate report finding excessive speculation in wheat markets:

Commodity index traders had snapped up more than 200,000 wheat contracts by mid-2008 that helped fuel last year’s record jump in prices, which ended up raising costs for both industry and consumers, according to a  year-long bipartisan Senate probe.

The report found large wheat purchases on the Chicago Mercantile Exchange pushed up futures prices, disrupted convergence between futures and cash prices and increased costs for farmers, the grain industry and consumers. READ HERE.

And for those diehard fans of Commodify Me! who are also interested to see what impact speculation and the ensuing speculative bubble had on oil prices in 2008, then please read the transcript of a 60 Minutes story on CBS :  Did Speculation Fuel Oil Price Swings?