CFTC's Chilton Floats High Position Limits at Argus Media Conference
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HOUSTON, Oct. 21 /PRNewswire/ -- The US should use caution and avoid draconian position limits on energy holdings when it implements new regulations on derivatives markets, Commodities Futures Trading Commission (CFTC) commissioner Bart Chilton told an Argus Media conference on oil market regulation in Houston today.
Chilton's comments give an early glimpse into the kind of new trading regulations the US government is moving toward following last year's run-up in energy prices, which some politicians have blamed on "financial speculation." The CFTC currently imposes position limits on traded agricultural products, but so far it has allowed exchanges to set their own restrictions on energy products.
The CFTC could move forward with position limits even as a separate legislative initiative progresses through Congress, Chilton said. "The Commission can act simultaneously," he said.
Critics of severe position limits proposals have said that type of restriction would send trading to even less regulated over-the-counter (OTC) markets or overseas.
"Maybe you can go high enough initially that no one is impacted," Chilton told the audience at the Argus Oil Market Regulation Summit. "And ratchet it down as we're looking at markets."
"Until we get the legislation... which will allow us to see trillions of trillions of dollars traded over the counter... if we put position limits on the regulated exchanges it is a very real possibility that trading could migrate to a less transparent venue - OTC land - where we won't see any of it. The other place it could migrate is overseas, and we don't want to see that either."
A bill empowering more regulation of OTC markets, where derivatives are negotiated and traded privately without an exchange, is moving through the US House. The House Financial Services Committee approved a bill on October 15 that would require swap dealers and major market participants to submit swaps for clearing and then trade them on exchanges or alternative swap execution facilities. The bill would exempt companies using swaps to hedge their risks against fluctuations in commodity prices.
Chilton said he agreed with some exemptions.
"If it's an exemption for your business risk, it makes sense. But I don't want to give a blank check or carte blanche exemption and say you're a big bank ... just go ahead and get an exemption from all the limits everybody else has to trade by," he said. "I'd like the exemptions to be tailored and targeted, and I'd like them to be verifiable. Someone's going to have to come to the CFTC and prove that you need them."
Today the House Agriculture Committee is taking up its own version of the bill, which as of this morning did not contain hedging exemptions comparable to the version approved by the Financial Services Committee.
For further information contact: Euan Craik, Argus chief executive Americas, euan.craik@argusmedia.com, +1 713 968 0000
About Argus Media
Argus is a leading provider of price assessments, business intelligence and market data on the global natural gas, coal, electricity, oil, emissions and transportation industries. It is headquartered in London and has offices in Houston, Washington, Jersey City, Portland, Johannesburg, Dubai, Singapore, Tokyo, Beijing, Sydney, Moscow, Astana, Kiev and other key centres of the energy industry. Argus was founded in 1970 and is a privately held UK-registered company. Learn more at www.argusmedia.com.
SOURCE Argus Media
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