As reports and rumors continue to swirl surrounding news of Amaranth Advisors LLC’s significant losses last week, calls for better regulation continue to come in while trading exchanges attempt to assure the public that they were not adversely impacted. The Greenwich, CT-based hedge fund revealed last week that bad bets in natural gas futures have cost the company about 65% of its $9.5 billion asset value (see Daily GPI, Sept. 22; Sept. 25).

One Washington DC-based futures broker said that while Amaranth wasn’t the first hedge fund to lose big, it also won’t be the last unless regulation finds its way into hedge funds and over-the-counter markets.

“No one really knows what is going on in the over-the-counter market,” the broker said. “It’s not like it is a bunch of guys trading over in the corner somewhere…this is a market that is very substantial and it affects a lot. It is very unfortunate that we have something like this going on. It’s hard to believe that someone would put so much of their portfolio into a single trade. When there is no regulation, you have a serious problem.”

However, the broker said he believes too much was made of its impact on the natural gas futures market. “It has been widely suggested that Amaranth’s downfall was one of the major reasons for the sell-off of the last couple of weeks, but I don’t really buy into that theory,” he said. “I think it is more a result of more-than-healthy storage levels, lack of Gulf of Mexico hurricanes this season and reports of a warm beginning to winter. All of the elements that legitimately could have caused people to have concern about natural gas’ price and availability are turning out not to be in play, so I think prices are adjusting as a result of that. Now that the winter months have been coming down much faster than the front month, the relationship is now coming back into a much more acceptable range as we approach the 2006-2007 winter.”

In an attempt to quell rumors regarding Amaranth’s impact on trading exchanges, both the IntercontinentalExchange (ICE) and the New York Mercantile Exchange (Nymex) have said they are conducting business as usual.

“With regard to Amaranth and its recently reported losses in the energy markets, Amaranth’s business is not individually material to ICE’s revenues,” ICE said on Monday. “In addition, Amaranth’s losses do not appear to have resulted in any disruption to the operation of the natural gas markets.”

Similarly, Nymex last week assured that the fund’s significant losses had not created a ripple in operations or on the markets (see Daily GPI, Sept. 21). “The account and carrying clearing member are in good standing,” Nymex spokeswoman Anu Ahluwalia said last Wednesday. “Nymex continues to actively oversee and maintain orderly markets.”

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