WASHINGTON - The U.S. futures markets regulator would have more authority to regulate overseas trading of crude oil contracts on a U.S.-based electronic exchange under legislation introduced by U.S. lawmakers from both parties on Thursday.
The bill, sponsored by Senators Maria Cantwell and Olympia Snowe, is aimed at forcing the Commodity Futures Trading Commission to regulate the overseas trading of the West Texas Intermediate oil contract on electronic platforms.
"It is of critical importance we unmask who is playing in these dark markets," said Cantwell, a Washington Democrat.
The law would force the Atlanta-based IntercontinentalExchange to register as a designated contract market, making it subject to greater scrutiny by the CFTC.
Electronic trading of WTI contracts on a London exchange operated by ICE is exempt from most CFTC oversight, even though such contracts are linked the New York Mercantile Exchange's contract, which has a delivery option in Cushing, Oklahoma.
ICE cannot continue to be treated as a foreign exchange, Cantwell said.
"Right now it's as if we are allowing drivers to go 120 miles per hour on U.S. freeways because they don't have speed limits on the German autobahn," she said.
The legislators said the CFTC must do more than try to bargain with its counterpart in the United Kingdom, the Financial Services Authority, to gain information about traders on ICE Futures Europe. Snow, a Maine Republican, said that with prices of oil soaring to record highs near $140 a barrel, the U.S. regulator must engage directly with ICE and force the exchange to cooperate.
"This isn't the time to negotiate," Snow said.
Currently the CFTC and FSA are in talks to institute the first-ever position limits on WTI contracts on the ICE Futures Europe exchange, a U.S. congressional source told Reuters.
These restrictions by themselves will not be effective, said University of Maryland Law Professor Michael Greenberger at a press conference with the senators.
"Even if you have those speculative limits, if you don't know who the speculators are, it doesn't do any good," he said.
As oil prices have reached record highs, U.S. lawmakers have increasingly blamed speculators for the run up in prices and pressured the CFTC to do more to regulate the futures markets.
The bill, sponsored by Senators Maria Cantwell and Olympia Snowe, is aimed at forcing the Commodity Futures Trading Commission to regulate the overseas trading of the West Texas Intermediate oil contract on electronic platforms.
"It is of critical importance we unmask who is playing in these dark markets," said Cantwell, a Washington Democrat.
The law would force the Atlanta-based IntercontinentalExchange to register as a designated contract market, making it subject to greater scrutiny by the CFTC.
Electronic trading of WTI contracts on a London exchange operated by ICE is exempt from most CFTC oversight, even though such contracts are linked the New York Mercantile Exchange's contract, which has a delivery option in Cushing, Oklahoma.
ICE cannot continue to be treated as a foreign exchange, Cantwell said.
"Right now it's as if we are allowing drivers to go 120 miles per hour on U.S. freeways because they don't have speed limits on the German autobahn," she said.
The legislators said the CFTC must do more than try to bargain with its counterpart in the United Kingdom, the Financial Services Authority, to gain information about traders on ICE Futures Europe. Snow, a Maine Republican, said that with prices of oil soaring to record highs near $140 a barrel, the U.S. regulator must engage directly with ICE and force the exchange to cooperate.
"This isn't the time to negotiate," Snow said.
Currently the CFTC and FSA are in talks to institute the first-ever position limits on WTI contracts on the ICE Futures Europe exchange, a U.S. congressional source told Reuters.
These restrictions by themselves will not be effective, said University of Maryland Law Professor Michael Greenberger at a press conference with the senators.
"Even if you have those speculative limits, if you don't know who the speculators are, it doesn't do any good," he said.
As oil prices have reached record highs, U.S. lawmakers have increasingly blamed speculators for the run up in prices and pressured the CFTC to do more to regulate the futures markets.
