CFTC Chair Calls Hearing on Limits to Energy Speculation

By Published On: July 10, 2009

In a move that signals a potential squeeze on energy traders, Commodities Futures Trading Commission chair Gary Gensler said July 7 that the agency plans to hold a hearing later this month on how to eliminate “excessive speculation.” The commission, Gensler said in a statement, has “broad authorities” to regulate futures markets to prevent speculation from placing “undue burdens” on the economy. “We must aggressively use all existing authorities to ensure market integrity.” The move is aimed at energy futures trading primarily in the natural gas, oil, heating oil, and gasoline market Gensler suggested that it might be time to place energy traders under the same position limits the commission enforces in agricultural commodity trading markets. Right now, he observed, the commission has a hands off approach to energy, letting commodities markets set position limits. “Bona fide” hedges for those who actually intend to use an energy commodity could be exempted from position limits, he said. However, the commission may not allow any exemptions for those who use energy futures strictly as a hedge against financial risk. Position limits aim to prevent market manipulation typically by governing the number of contracts or number of units of a commodity any one party may hold in a market.

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