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CFTC to Take Up Position Limits This Week

The Commodity Futures Trading Commission (CFTC) has scheduled two hearings this week and one in early August to explore whether the agency should set position limits on energy commodities, as well as whether exemptions are appropriate.

The hearings are scheduled for Tuesday, Wednesday and Aug. 5 between 9 a.m. and 1 p.m. EDT at the CFTC's headquarters in Washington, DC. Rep. Bart Stupak (D-MI); CFTC staff; Jeffrey Sprecher, CEO of Atlanta-based IntercontinentalExchange (ICE); and Terry Duffy, executive chairman of the Chicago Mercantile Exchange, as well as representatives from the Futures Industry Association, Delta Airlines, the American Public Gas Association and the Petroleum Marketers Association of America will testify at the kick-off hearing.

"While the CFTC currently sets and ensures adherence to federal position limits for certain agriculture products, the agency does not do the same for energy markets. Our hearings...will be critical as we look into different approaches to regulate energy markets," said CFTC Chairman Gary Gensler. The agency announced it intent to hold the hearings earlier this month (see NGI, July 13).

"Though we are initially focused on energy, the commission intends to further review other commodities of finite supply in future hearings," he noted. The hearings will examine several issues, including:

ICE, a major energy trading platform, said it welcomes the opportunity to participate in the CFTC's hearings on position limits in energy trading markets, noting that it has been an area of concern for some time. Independent oil and natural gas producers, however, were less receptive, warning that dramatic changes by the CFTC affecting their hedging activities could cripple development.

"If the CFTC and Congress obstruct common sense market activity, independent energy producers will not be able to hedge their production. Without hedging, companies will be unable to protect their cash flow to maintain exploration and production budgets and retain employees when prices drop...With less production comes higher prices," said Barry Russell, president of the Independent Petroleum Association of America.

The CFTC hearings will be open to the public and webcast at www.cftc.gov.

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