WASHINGTON U.S. oil futures regulators on
Tuesday unveiled a plan to slap the first trading limits on oil
contracts that change hands on a London electronic exchange as
U.S. lawmakers called for more regulations to rein in
The U.S. Commodity Futures Trading Commission and its U.K.
counterpart reached a deal with ICE Futures Europe (ICE.N) to
impose regulations on West Texas Intermediate oil contracts
that trade on the London-based electronic exchange within 120
days, the CFTC's chairman told U.S. lawmakers.
The move will place more limits on trading of the U.S.
benchmark WTI contract on the London exchange, which hosts up
to 30 percent of total volumes. The New York Mercantile
Exchange NMX.N, which the CFTC regulates, has the rest.
Lawmakers said the lack of limits on the ICE exchange
created what they call the "London loophole" that allows oil
traders to evade U.S.-style regulations.
Charles Vice, president and chief operating officer of the
Atlanta-based IntercontinentalExchange Inc, said it is "highly
unlikely" that ICE Futures Europe is the "primary driver"
behind WTI prices.
Expectations that more regulations on ICE trading will tame
prices "are likely to go unmet," Vice said.
U.S. regulators are feeling heat from U.S. lawmakers to
rein in what they see as excessive speculation in commodities
markets, which they believe is the culprit behind record crude
oil prices that have risen nearly 40 percent since January to
record highs near $140 a barrel.
NO SMOKING GUN
CFTC Acting Chairman Walter Lukken, whose agency is
conducting a nationwide probe of crude oil markets, conceded
that "the environment is ripe for those wanting to illegally
manipulate the markets."
However, the top U.S. futures market regulator said there
was no "smoking gun" that indicates that speculators are to
blame for record oil prices.
Democrats on the joint Senate panel said the CFTC lacks
enough information to make that determination.
Sen. Richard Durbin, Illinois Democrat, asked Lukken what
percentage of U.S. crude oil trades are reported to the CFTC,
and Lukken said he was not certain.
"Precisely, and that is one of the reasons why we are here.
You don't know," Durbin told Lukken. "You can't answer that
However, billionaire oil investor T. Boone Pickens said
boosting the CFTC's oversight of oil markets was "a waste of
time," and said speculation is not to blame for oil prices.
"It's a global market," Pickens told reporters after
testifying before a separate Senate panel. "It doesn't have
anything to do with traders on Wall Street or anyplace else."
And Sen. Saxby Chambliss, Georgia Republican, said
Democrats are rushing to legislate without all the facts.
"Simply assigning blame won't yield results, especially
when the main problem is supply and demand," he said.
Lukken said his agency is trying to strike the proper
balance of regulations without chasing business away from
regulated exchanges like the NYMEX.
The CFTC is also taking a closer look at "swap" deals
offered by big investment banks like Goldman Sachs (GS.N) and
Morgan Stanley (MS.N) to see if they allow agency rules that
limit the number of oil contracts any one trader can hold,
(Editing by Christian Wiessner)