Changes required by the U.S. Commodity Futures Trading Commission (CFTC) to regulate what has been called the "London Loophole" will go a long way toward ensuring a greater degree of certainty that oil and gas prices will be fair for consumers, said U.S. Senators Maria Cantwell (D-WA) and Olympia J. Snowe (R-ME) today.
"While more needs to be done to fully close the foreign oil trading loophole and rein in excessive speculation across all energy markets, this is a victory for consumers and will help ensure more efficient and effective markets," Senator Cantwell said. "The regulatory action today will not only add transparency to markets here and abroad, but also allow U.S. regulators to impose limits on the amount of trading by individuals, thus guarding against manipulation. I'm pleased that we have been able to convince the CFTC that more needed to be done. High and volatile gas prices are too damaging to families and businesses to have anything other than aggressive oversight of these markets."
"The CFTC's announcement today is a welcome step in taking back control of our energy futures markets," Senator Snowe said. "I have long been concerned that the CFTC's previous no-action policy with respect to ICE Futures Europe simply outsourced our regulations and provided the opportunity for excessive speculation and manipulation. There is no question that U.S.-based contracts should be subject to the same level of oversight and transparency and have critical position limits no matter where they are traded in the world. I am encouraged that the CFTC's announcement today, coupled with agency action last year, has responded to my call with Senator Cantwell for consistency and accountability in foreign energy markets that operate like U.S. exchanges."
Cantwell and Snowe have spearheaded several bipartisan efforts, including urging CFTC leadership to ensure that prices on the U.S. crude oil benchmark contract traded on the New York Mercantile Exchange (NYMEX) are not skewed by a look-alike contract traded on the InterContinental Exchange (ICE) Futures Europe located in London.
CFTC Commissioner Bart Chilton said that, "The leadership of Senators Cantwell and Snowe really propelled this issue forward. Without their bipartisan leadership, I'm not sure we would have moved forward."
According to the CFTC, the regulator will require that ICE Futures Europe will now be required to, "... abide by new conditions designed to enhance the CFTC's ability to carry out its market surveillance responsibilities and maintain integrity of markets."
The Senators also have made the case for changes directly to the new CFTC Chairman, Gary Gensler. In a news release, Gensler said, "The CFTC must ensure that U.S. commodity markets operate fairly and efficiently and are free from fraud, manipulation and other market abuses."
According to the CFTC, the new conditions require ICE Futures Europe to do the following within 120 days:
· Provide CFTC staff with trade execution and audit trail data for the CFTC's Trade Surveillance System for all of ICE Futures Europe's linked contracts;
· Provide for CFTC staff on-site visits for the purpose of overseeing ICE Futures Europe's ongoing compliance with its no-action relief;
· Provide CFTC staff advance copies of all rules, rule amendments, circulars, and other notices published by the exchange;
· Provide to CFTC staff copies of all Disciplinary Notices involving ICE Futures Europe's linked contracts upon closure of the action; and,
· In the event that the CFTC, pursuant to its Commodity Exchange Act Section 8a(9) emergency powers authority, directs the NYMEX to take emergency action with respect to a linked contract, ICE Futures Europe will promptly take similar action with respect to the linked contract at ICE Futures Europe. Additionally, the CFTC announced on July 30, 2009, that the agency is now integrating the ICE Futures Europe large trader data into the Commitment of Traders Report.
In May 2008 and July 2009, Senators Cantwell and Snowe authored the attached letters to the CFTC requesting the Commission use its existing authority to directly regulate all U.S. based trading of U.S. oil contracts.