IntercontinentalExchange Inc. (ICE) was expected to issue an advisory Thursday detailing plans to impose position and accountability limits on its Henry Hub over-the-counter (OTC) swaps contract to conform with directives from the Commodity Futures Exchange Commission (CFTC). The changes will take effect with the February 2010 contract.
ICE will limit traders to 4,000 front-month contracts in the last three days before expiration and impose accountability levels of 24,000 contracts in a single month and 48,000 contracts in all months, according to Ed Dasso, ICE’s market surveillance manager. Dasso told NGI the contract levels represent equal volumes of gas to those imposed by the CME Group’s New York Mercantile Exchange (Nymex), although the number of contracts differs because of the difference in contract size on the two exchanges.
He said the advance notice would allow time for traders to apply for an exemption or roll out of their contracts. ICE is posting guidelines for exemptions on its website.
The ICE action follows a CFTC decision in July to bring the ICE Henry Financial LD1 Fixed Price contract under its regulatory authority, saying the contract “performs a significant price discovery function.” The ICE contract is a “look-alike” contract to the Nymex Henry Hub contract, which already is regulated.
The CFTC has since issued a series of notices that indicate it is investigating 24 other natural gas-related OTC contracts with the potential for significant price-discovery impact and is expected to bring those under its wing soon (see Daily GPI, related story; Oct. 19; Oct. 8). The contracts involve the most heavily traded natural gas locations in the United States and Canada, including Chicago, New York, the California border, the Houston Ship Channel and the AECO hub in Alberta. In each case the public and industry were given just 15 days to comment on the proposed change in status.
The CFTC also has actions under way to regulate electric power futures contracts.
ICE already has begun submitting enhanced market statistics for its cash-settled Henry Hub natural gas swap market to the CFTC as part of the regulatory change. Clearing firms will begin providing large-trader data to the CFTC and ICE’s data will be incorporated in the weekly Commitment of Traders report.
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