CFTC prepares crackdown on energy speculators

CFTC prepares crackdown on energy speculators

Sweeping reforms for oil and natural gas trading are being considered by the US commodities regulator in a bid to reduce the systemic risks posed by speculators.

Gary Gensler, chairman of the US Commodity Futures Trading Commission, said in a statement on Tuesday that it would consider setting position limits on energy futures over the summer ahead of a series of anti-speculation bills which are pending in Congress.

“Our first hearing will focus on whether federal speculative limits should be set by the CFTC to all commodities of finite supply, in particular energy commodities such as crude oil, natural gas, gasoline and other energy products,” Mr Gensler said.

Currently the CFTC does not impose position limits on those trading crude and other energy products, with limits being set instead by futures exchanges.

Reckless use of derivative contracts was widely acknowledged as a major contributor to the global financial crisis, with the opacity and leverage of the various derivative markets seen as allowing traders to take on large risks away from the eyes of regulators.

Last month Mr Gensler told the Senate that dealers in over-the-counter derivatives should face more conservative position limits and capital requirements.

”The commission will be seeking views on applying position limits consistently across all markets and participants, including index funds and managers of exchange-traded funds; whether such limits would enhance market integrity and efficiency; whether CFTC needs additional authority to fully accomplish these goals; and how the commission should determine appropriate levels for each market,” he statement said.

Mr Gensler also said that the CFTC would change its Commitment of Traders report, which provides a weekly breakdown of open interest on the various US commodities markets, to show the the activities of swaps dealers and hedge funds.

No precise date was set for the changes to take place.
.Copyright The Financial Times Limited 2009