(Adds Sabino comment)
NEW YORK, Aug 6 (Reuters) - The U.S. Federal Trade Commission said on Thursday it would impose $1 million per day fines on energy traders engaged in price manipulation, a strong signal of the Obama administration's desire to crack down on fraud in the oil markets. [ID:nN06323742]
The FTC said some of the violations it will seek to punish include false public announcements of planned pricing or petroleum output decisions, false statistical or data reporting, and so-called "wash sales" intended to disguise the liquidity in a market or pricing of a product.
Click here to see the FTC rule: here
Following are selected quotes: ANTHONY SABINO, PROFESSOR OF LAW AND BUSINESS. ST. JOHN'S UNIVERSITY, NEW YORK: "Frankly, this is a little ridiculous. There are already substantial penalties under a variety of statutes, both federal and state, for disseminating false information for profit. This is mainly showboating by the FTC. Its energies would be better spent on promulgating circuit breakers, such as were installed on the stock exchanges after the 1987 Crash, to prevent wild swings and/or greater enforcement of existing rules." AMERICAN PETROLEUM INSTITUTE "We are concerned the new rule could lead to a less competitive market that would ultimately not be in the best interest of American consumers of gasoline, diesel and other petroleum products. It could discourage companies from providing information to the marketplace.
"Unlike other unfair or deceptive acts or practices, for which the penalty per violation under the FTC Act is $11,000, the maximum penalty here is nearly 100 times greater -- $1 million -- and it compounds each day until a violation is rectified.
This clearly is an overreaction by the FTC when strong deterrents already are in place." RACHEL ZIEMBA, LEAD ENERGY ANALYST AT RGE MONITOR, IN NEW YORK "I think what we are seeing are the different regulators are using the different tools that they have to try to curb the greatest aspects of what they view as excess in the financial markets.
I think what is going to be important is how coordinated the different regulators' responses are, both within in the United States but also between the U.S. and the United Kingdom.
Should there be greater obstacles to trading in the U.S. ... we could see a move to other market. The risk to be avoided is having a patchwork of responses." MICHAEL GREENBERGER, LAW PROFESSOR AT UNIVERSITY OF MARYLAND AND FORMER DIRECTOR OF TRADING AND MARKETS AT CFTC:
"Some people will say markets are moored to supply and demand fundamentals but it's clear the Hill is suspicious of wrongdoing.
I think oil prices will start going down and fundamentals will have more influence on prices.
Legislation now gives the FTC the right to investigate all these markets and see if traders are manipulating them. It changes things because the FTC defines manipulation in the same way that the SEC defines it in stock markets.
It allows for more investigation and it's a much more government-friendly definition of manipulation, a more consumer friendly one too.
This could affect the way commodities index funds and banks trading with proprietary funds can trade. FTC will be looking for trade that is prearranged, trades that make it appear there is market demand. These are called "wash trades" and they are a classic per se violation.
Today, nobody can tell that these prearranged trades are being done because they are mostly off the market. Some traders get together and draw up a trade contract, but they agree on their own prices rather than allowing fundamentals to determine them. This type of trading unmoors the markets from fundamentals, but has gone unchecked." TIM EVANS, ENERGY ANALYST, CITI FUTURES PERSPECTIVE, NEW YORK: "As far as I can tell, the new FTC rule does not expand the definition of activities that might constitute market manipulation, but just raises the potential fines. Since most criminals don't expect to be caught, I'm not sure the higher fines will necessarily constitute a major new deterrent. Overall, this seems a relatively minor adjustment that I would not expect to have any impact on trading activity or price levels." DAN FLYNN, ANALYST AT PFGBest RESEARCH, CHICAGO: "What makes one a violator is not clear. They're way too vague. They're taking speculators out of the market. I see more U.S. jobs lost because if they can't do it here, what is to prevent them from doing it somewhere else. We're getting into over regulation." QUOTES FROM U.S. CASH PRODUCTS TRADERS WHO ASKED NOT TO BE IDENTIFIED: **"It really depends on what resources the various agencies throw at (the effort). Most of them are hugely understaffed and don't really have the caliber of people to do the job. They need to hire more people from our business." **"I'm all for getting rid of any market manipulation, if there is any. How the regulations are going to achieve it, I'm not sure." **"Well, I have not seen the full details but to be honest one would have thought they should have been doing this sort of policing already. Like all of these agencies, none of them appears to be doing what is expected of them." (Reporting by Janet McGurty, Gene Ramos, Robert Gibbons, Joshua Schneyer, and Matthew Robinson; Editing by Marguerita Choy)