ICE Wants Regulators To Set, Manage Energy Position Limits
September 17 2009 - 11:22AM
Dow Jones News
The two biggest U.S. commodity exchange operators now have
dueling plans to cap speculative bets on energy futures, with
IntercontinentalExchange Inc. (ICE) proposing Thursday that federal
regulators take the lead in administering position limits.
With few details emerging from the U.S. Commodity Futures
Trading Commission on how it will enforce position limits, ICE and
CME Group Inc. (CME) have this week stepped in to fill the void
with plans of their own.
CFTC Chairman Gary Gensler has said that the government should
be responsible for setting and running position limits in energy,
though the agency hasn't said what action it will take.
ICE agrees that the CFTC should set limits that cover trading in
a commodity across all markets, similar to how the agency regulates
agricultural markets that have long-standing position limits. The
CFTC should also be in charge of granting exemptions to limits for
companies that need to purchase large numbers of futures contracts
to manage their physical commodities business.
"The CFTC has the experience, systems, and increasingly, the
budget to administer this type of regime," ICE said in a statement,
adding that the regulators are "uniquely able to determine
compliance with limits and appropriateness of exemptions."
The proposal is markedly different from one released by CME
Group on Wednesday, which would have exchanges manage their own
position limits, with the CFTC capping the size of bets made in the
over-the-counter market. Limits would work as a percentage of open
interest in a contract.
ICE CEO Jeffrey Sprecher called the CME plan "anti-competitive,"
contending that it would "lock in incumbents" by allowing exchanges
with bigger trading volume to set higher limits. CME owns the New
York Mercantile Exchange, home to the light, sweet crude futures
market, the most actively traded U.S. commodity contract.
-By Brian Baskin, Dow Jones Newswires; 212-416-2453;
brian.baskin@dowjones.com