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

Geithner wants OTC derivatives traded on exchanges

A story from the Oil & Gas Financial Journal about U.S. Treasury Secretary Timothy Geithner talking about greater reglation for over-the-counter derivatives (OTC).

OTC derivatives are a type of contract used on the commodity exhange. They are privately negotiated and traded directly between two parties, without going through an exchange or other intermediary. CLICK HERE to read more about OTC derivatives.

Geithner says the Obama administration would like all standardised derivative contracts cleared through well-regulated central counterparties and executed either on regulated exchanges or regulated electronic trading systems.

Geithner says the reforms should not limit businesses’ efforts to manage financial risk (hedge):

“We want to preserve their capacity to participate in bilateral transactions as hedges as we increase overall protection for investors,” Geithner told a joint hearing of the U.S. House Agriculture and Financial Services Committees. READ HERE.