CFTC Scrutinized as Congress Looks into Oil Price Jump

WASHINGTON -- The House Agriculture Committee will host hearings examining whether the Commodity Futures Trading Commission (CFTC) has a handle on the fast-growing, $5 trillion futures market for oil and other commodities or needs other tools, the Washington Post reported. It also will examine how that market is affected by the $9 trillion "over-the-counter" market that has mushroomed outside CFTC regulation.

The committee has asked lawmakers to outline competing bills that could significantly reshape the commodities markets, the Post reported.

In addition to calling for the collection of more-detailed trading data, some measures seek to ban pension funds from commodities; sharply increase the collateral required to make a trade; or limit the size of some investors' trades, the Post reported.

The CFTC has maintained for years that an influx of investor cash into commodities has not distorted prices but instead provided liquidity, or greater numbers of buyers and sellers, the Post reported. The acting chairman of the CFTC, Walter Lukken, a Republican, says supply-and-demand fundamentals still are driving prices, but in recent weeks, has taken a more-aggressive stance on oversight at an agency known for a free-market culture.

The CFTC is overhauling its information-reporting requirements, increasing regulation of electronic energy trading and using its "special call" authority to require new data about over-the-counter trading, the Post reported. The CFTC says it will significantly expand international surveillance by requiring more information sharing from the London oil-trading arm of Atlanta's IntercontinentalExchange Inc. It also announced it will condition access by U.S. traders to London markets on limits to the size of their positions, according to the Post.

But the CFTC is not moving fast enough for Congress, whose members do not want to tell voters furious about gas prices that there is nothing Washington can do, the Post reported. Late last month, the House voted to force the CFTC to use emergency powers to curb "excessive" speculation. The Senate will take up the measure this summer.

-- NYSSCPA.org News Staff

Posted on 7/7/08