NYMEX president calls the idea of FERC monitoring gas trading 'a mistake'

Paula Dittrick
Senior Staff Writer

HOUSTON, Oct. 24 -- The president of the New York Mercantile Exchange president said that he believes it would be a mistake for government to require the Federal Energy Regulation Commission to monitor natural gas trading as some politicians have suggested.

"I think it would be a mistake for the government to endorse and require a single agency to be the collector and disseminator of what has been a commercial endeavor," NYMEX Pres. J. Robert Collins Jr. told reporters earlier this month.

"You never know how a bill is going to come out of Congress. I hope they come out with something that encourages some framework around price reporting without handing it over to an institutional or governmental agency," he added of the pending energy bill.

He was in Houston for an Oct. 8 NYMEX reception with customers shortly after NYMEX announced that Marianne Hughes was the director of NYMEX's Houston office. She is a former Coastal Corp. vice-president and the first woman elected to the NYMEX board. Collins said Hughes will serves "as our official liaison to the local energy community."

On another topic, Collins said NYMEX is waiting for the right time to relist a contract for trading Brent. No date has been scheduled, he said.

Price reporting
Natural gas markets have been rocked by federal regulators investigating false price reporting to trade publications, such as Platts, an energy information service subsidiary of McGraw-Hill Cos.

The US Commodity Futures Trading Commission has settled with various companies over price manipulations. (OGJ, Aug. 11, 2003, p. 42).

Rep. Joe Barton, R-Texas, has said a Republican-written draft energy bill would require FERC to collect and disseminate market prices. Collins said that he hopes that legislative language does not become law.

"I think that level of regulation would be onerous. It would certainly dissuade new entrants into the market because of the regulatory burden. What I hope they will do is embrace some of the price reporting standards that have come out of workshops," he said.

These workshops have been sponsored by the Committee of Chief Risk Officers, an industry group, and also by the University of Houston (OGJ, July 14, 2003, p. 7). Collins is affiliated with UH's Global Energy Management Institute.

"The political nature of energy is a big driver around this sensitivity to accurate price reporting and ethical trade," Collins said. "The national landscape for dealing with energy issues has become highly politicized."

Regarding price reporting, he said any rules of behavior must be well known and well published.

"The silver lining to this whole cloud is that the business of prosecuting right from wrong is reshaping the way that companies behave now," he said.

Some companies have stopped natural gas trading, and the volume of electronic trading handled by companies outside the exchange has dropped in the wake of the price reporting questions.

"Our electronic trading has done just the opposite," Collins said, adding that NYMEX trading volumes have risen. "Most of that is geared toward the fact that NYMEX has become a more important reference point in business."

Brent options
On Sept. 7, 2001, NYMEX initiated a Brent options (OGJ, Oct. 8, 2001, p. 20). But its volume fell after the Sept. 11, 2001, terrorist attacks upon the US. Consequently, NYMEX said it was developing a new strategy.

"That is one where we went back to the drawing board on its structure. We have developed a physical deliverable contract. We have in place all the mechanisms that we need to list that in a very, very short period of time. We are waiting for the right market conditions and the right impetus to open up an opportunity to do that," Collins said.

No date has been scheduled, he added.

Contact Paula Dittrick at Paulad@ogjonline.com.

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