Derivatives

The Commodity Futures Trading Commission (CFTC) plans to soon begin finalizing the proposed rules to oversee the multi-trillion dollar derivatives market in the United States, but it doesn’t believe it will be able to complete its work by the July deadline set by Congress.

The Commodity Futures Trading Commission (CFTC) plans to soon begin finalizing the proposed rules to oversee the multi-trillion dollar derivatives market in the United States, but it doesn’t believe it will be able to complete its work by the July deadline set by Congress.

While the Commodity Futures Trading Commission (CFTC) works its way through the regulatory process to set position limits on over-the-counter (OTC) derivatives trading, “there are things we can do right now, that we can implement in January if necessary,” to rein in an out-of-control market, Commissioner Bart Chilton said in testimony before a congressional committee Wednesday.

One day after the House Agriculture Committee approved HR 977, the Derivatives Markets Transparency and Accountability Act of 2009, Global commodities exchange CME Group on Friday bashed the legislation, saying it would drive “a significant portion” of over-the-counter (OTC) trading offshore and outside of the U.S. government’s jurisdiction.

Dutch bank ABN Amro confirmed Friday it was closing down its trading operations involving natural gas, oil, and freight derivatives, cutting back to focus on its core markets of emissions and precious metals.

While the U.S. oil and gas sector makes extensive use of derivatives to manage commodity price risk, and in some cases make a speculative buck, Standard & Poor’s Ratings Services (S&P) said producer hedging practices have little impact on corporate credit ratings. This is mainly due to the fact that most companies hedge production only as far out as two years or so, and the ratings agency takes a longer-term view when assessing credit.

While the U.S. oil and gas sector makes extensive use of derivatives to manage commodity price risk, and in some cases make a speculative buck, Standard & Poor’s Ratings Services (S&P) said producer hedging practices have little impact on corporate credit ratings. This is mainly due to the fact that most companies hedge production only as far out as two years or so, and the ratings agency takes a longer-term view when assessing credit.

Completing its seventh week of operation, the derivatives auction based on the Energy Information Administration’s (EIA) weekly natural gas storage report continues to grow, its sponsors say. Launched by ICAP Energy, Goldman Sachs and Nymex in early June, the electronic options auction looks to help market participants “manage exposure” to the impact of reported natural gas storage inventories released by the EIA each week (see NGI, May 3).

Going into its seventh week of operation, the derivatives auction based on the EIA’s weekly natural gas storage report continues to grow, its sponsors say. Launched by ICAP Energy, Goldman Sachs and Nymex in early June, the electronic options auction looks to help market participants “manage exposure” to the impact of reported natural gas storage inventories released by the Energy Information Administration (EIA) each week (see Daily GPI, April 29).