U.S. regulators are scrutinizing derivatives markets after severe winter weather paralyzed Texas’ energy grid last week and sent natural gas cash prices soaring, the acting chairman of the Commodity Futures Trading Commission (CFTC) said.
The head of the CFTC said the regulator is monitoring Texas energy markets for any “irregularities” in the next-day and futures markets after an extraordinary deep freeze left millions of Texans without power, exposed vulnerabilities in the state’s energy system and resulted in “the tragic loss of life.”
“We remain prepared to do whatever is necessary to protect the integrity of our markets,” Acting Chairman Rostin Behnam told the CFTC’s Market Risk Advisory Committee Tuesday.
As demand surged and frigid temperatures limited gas production and delivery, prices skyrocketed to record levels. Some ratepayers in Texas were shocked in recent days to receive utility bills amid the energy crisis that were exponentially higher than normal.
The CFTC was already on high alert following a recent surge in silver futures – apparently fueled by social media commentary – Behnam said.
A day earlier, FERC said it was investigating the Texas wholesale natural gas and electricity markets for any participants engaged in market manipulation or other violations during the Texas energy crisis.
The Federal Energy Regulatory Commission said that, if potential wrongdoing is identified, commissioners would “pursue those matters as nonpublic investigations.”
FERC said the inquiry would begin with the Division of Analytics and Surveillance’s ongoing surveillance of market behavior in the gas and power markets.
The CFTC’s Behnam said he and staff at the commission are “communicating with fellow regulators, exchanges and stakeholders to address any potential threats to the integrity of the derivatives markets, evaluating in real-time structural and transparency concerns.”
He said derivatives markets “play a critical role in the everyday lives of all Americans” and this is “especially true when it comes to the production and supply of reliable and low-cost energy.”
The “Arctic blast highlighted weaknesses in our energy infrastructure that will likely be challenged and stressed more often in the future as a result of more frequent extreme weather events,” Behnam said. With that expectation in mind, he said CFTC is committed to ensuring “our markets remain transparent, fair and efficient, and fulfill their core responsibilities of price discovery and risk management.”
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