REGULATION
and the traders have 30 days to show FERC why they should not be sanc- ments on ICE and other unregulated
tioned with civil penalties and forced to disgorge profits totalling exchanges are the most likely first steps.
US$291 million for trades in February, March, and April 2006.
8
Any additional measures will require
The regulators now face the challenge of increasing
carefully review and evaluation to ensure
that the cure of increased regulation is
the effectiveness of their oversight activities without
not worse than the disease caused by
forcing market participants into unregulated
market failure
•
bilateral OTC markets
Carlos Blanco, Ph.D. is Managing
Ultimately, ICE may need to participate in the CFTC large-trader
Director of Black Swan Risk Advisors, LLC.
reporting system so that the CFTC can assess the potential market
He is also a lecturer on Risk Management
at the University of California, Berkeley
impact of large speculative positions. The regulators now face the chal-
and a faculty member of the Oxford
lenge of increasing the effectiveness of their oversight activities with-
Princeton Programme.
out forcing market participants into unregulated bilateral OTC markets.
E:
carlos@blackswanrisk.com
Removing the Enron loophole as well as increasing disclosure require-
Anita M. Herrera, President of OTC Legal
LLC., is an energy and derivatives lawyer
Footnotes:
based in Washington, DC. OTC Legal and
1 “Excessive Speculation in the Natural Gas Market” Staff Report (with additional minority
staff views). Permanent Committee on Investigations. United States Senate. 2007
Black Swan Risk Advisors provide risk
2 7 U.S.C. § 6g(d).
management, regulatory, compliance,
3 Commodity Futures Trading Commission, “Backgrounder: The CFTC’s Large-Trader transactional tax solutions and
Reporting System”, CFTC website:
www.cftc.gov/opa/backgrounder/opa-ltrs.htm
documentation services, including master
4 Commodity Futures Trading Commission, “Backgrounder: The CFTC’s Large-Trader
agreements for trading energy
Reporting System”, CFTC website:
www.cftc.gov/opa/backgrounder/opa-ltrs.htm
Section 4a(a) of the Commodity Exchange Act authorises the CFTC to establish speculative
commodities and derivatives.
limits on commodity futures contracts.
E:
aherrera@otclegal.com
5 ICE Rejects Amaranth Criticism. Financial News, 25 June 2007.
6 See CFTC letter to Senator Jeff Bingaman, February 22, 2007, pp. 3, 7.
7 US Commodity Futures Trading Commission Charges Hedge Fund Amaranth and its
Reference:
Former Head Energy Trader, Brian Hunter, with Attempted Manipulation of the Price of
Blanco, C. Herrera, A., “Lessons from
Natural Gas Futures, CFTC Press Release 5359-07, July 25, 2007. recent hedge fund liquidations”.
8 Commission takes preliminary action in two major market manipulation cases, FERC
The Risk Desk, April, 2007.
News Release, July 26, 2007.
Powerful Risk and Trade
Margin call predictor
Stress tester
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Risk monitoring
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