UPDATE: CFTC To Include ICE Data In Weekly Trader Report
July 30 2009 - 4:59PM
Dow Jones News
The U.S. Commodity Futures Trading Commission said Thursday it
plans to regularly include some data it receives from ICE Futures
Europe in its weekly large trader reports starting this Friday.
The expansion of data that will be included in its weekly report
is part of a broader push announced earlier this month to shed more
light on the trading activity of large players in the futures
market. The weekly report will, for the first time, contain
information about large positions that traders hold in ICE Futures
Europe's West Texas Intermediate Crude Oil contracts, which are
cash-settled against the price of the New York Mercantile
Exchange's crude oil contracts.
The CFTC currently details open positions solely for the Nymex
oil contract, which had more than double the open interest of the
ICE contract, according to last week's report.
"The CFTC has a responsibility to ensure that our markets are
transparent and free from fraud, manipulation and other abuses,"
CFTC Chairman Gary Gensler said. "I am pleased to announce that we
will this week begin fulfilling our commitment to greater
transparency by including position data the CFTC receives for
foreign contracts linked to the settlement price of domestic
contracts."
ICE Futures Europe, which is owned by Atlanta-based
IntercontinentalExchange Inc. (ICE), is considered a foreign board
of trade by the CFTC but since 1999 has received permission to
offer U.S. traders electronic access to its trading platform
through a no-action letter. The letter was granted to the exchange
before it was bought by the U.S.-based company in 2001.
But the company came under fire from critics in 2006 after it
began offering several futures and options contracts that were
based on the settlement prices of Nymex's West Texas Intermediate
crude oil contract. Critics said ICE shouldn't be considered a
foreign exchange because its parent company is headquartered in the
U.S. and they feared traders could circumvent position limits and
manipulate the markets or cause excessive speculation.
As oil prices climbed to record highs last year, the CFTC sought
to rectify the controversy and announced a special agreement with
ICE Futures Europe and the Financial Services Authority, which
regulates financial markets in the U.K. Under the agreement, the
FSA pledged to provide the CFTC with large trader position data
from the look-alike WTI contract and notify U.S. regulators when
traders exceeded accountability levels.
Gensler, the CFTC's new chairman, announced earlier this month
that in addition to possibly imposing new limits on speculative
energy trading, he also planned to beef up the CFTC's weekly large
trader reports to help the public get a better glimpse into the
markets. The expanded reports will contain data from swap dealers
and hedge funds. Position data will also eventually be included on
electronically traded contracts, such as ICE's Henry Hub natural
gas swap, that serve a significant price discovery function, and on
contracts offered by foreign boards of trade such as ICE Futures
Europe, whose settlement prices are linked to U.S. futures
contracts.
Such a change would be a departure from the current format of
the reports, which only classify large traders as hedgers or
speculators and make it difficult to get a true picture of the
marketplace. Many large derivative dealers, such as Goldman Sachs
Group Inc. (GS) or Morgan Stanley (MS), may declare themselves as
hedgers even if their trading strategies combine price risk
management and speculation.
-By Sarah N. Lynch, Dow Jones Newswires; 202-862-6634;
sarah.lynch@dowjones.com
(Brian Baskin contributed to this report.)