New CFTC Rules Reveal More ECM Contracts Could Face Oversight
May 13 2009 - 2:12PM
Dow Jones News
More electronic commodity contracts traded on exempt commercial
markets are helping set market prices than originally imagined - a
fact which could subject them to additional regulatory oversight,
the head of the federal commodities regulator revealed
Wednesday.
Until recently, the U.S. Commodity Futures Trading Commission
had more limited oversight authority over contracts traded
electronically on exempt commercial markets such as
IntercontinentalExchange Inc. (ICE). But when energy prices rose to
record highs last year, lawmakers expressed fears that traders were
affecting prices by using exempt commercial markets to bypass
speculative position limits imposed on similar types of energy
futures contracts traded on exchanges.
The 2008 farm bill sought to close this so-called "Enron
loophole" by empowering the CFTC to come up with new rules to
determine if such contracts were helping to set market prices. If
they do serve a "significant price discovery function," then the
CFTC must step up its oversight of the contract and impose
additional reporting requirements.
The CFTC approved most of those rules earlier this year. Until
now, it has been somewhat unclear how many contracts the new rules
might impact.
"We were told to look at significant price discovery contracts
and we have been doing that," acting CFTC Chairman Michael Dunn
said Wednesday, noting that preliminary reports suggest "it was
much larger than we originally thought" and that staff was
"surprised" by the preliminary findings.
He declined to elaborate, but said more information will be
available when it's ready.
-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634;
sarah.lynch@dowjones.com