Congress still has questions as CFTC unveils new foreign market data pact

The Commodity Futures Trade Commission improved its access to data on US commodities traded on overseas exchanges as it amended terms under which ICE Futures Europe is permitted direct access to US customers, the CFTC's top official told a joint hearing of two Senate committees.

The amended "no-action relief letter" will require ICE Futures Europe to adopt equivalent US position limits and accountability levels on its West Texas Intermediate crude oil contract, which is linked to the New York Mercantile Exchange crude oil contract, Acting CFTC Chairman Walter L. Lukken said.

It also will require ICE Futures Europe to follow similar US hedge exemption requirements and report any violations to the CFTC, he told a joint hearing of the Senate Agriculture, Nutrition and Forestry Committee and the Appropriations Committee's Financial Services and General Services Subcommittee.

"The CFTC will also require other foreign exchanges that seek such direct access to provide the CFTC with comparable large trader reports and to impose comparable position and accountability limits for any products linked with US regulated futures contracts," Lukken said.

"This combination of enhanced information data and additional market controls will help the CFTC in its surveillance of its regulated domestic exchanges while preserving the benefits of its mutual recognition that has enable proper global oversight over the last decade," he maintained.

'No one knows'

The announcement was applauded by several House and Senate members, but critics on both sides of the Capitol said that the CFTC still needs to do more. "With the economy in a tailspin and with the average price for a gallon of [gasoline] topping $4 across the country, people are asking why this is happening. Is excessive speculation taking place or is it simply supply and demand? The answer is that no one knows and the CFTC lacks the information, resources and, in some cases, legal authority to tell us," said Sen. Richard J. Durbin (D-Ill.), the Appropriations subcommittee chairman who ran the hearing.

He said that the joint hearing by these two committees was unprecedented but reflected intense interest in the CFTC's regulatory role and resources. Fifteen senators made opening statements or asked Lukken questions, Durbin noted before introducing a second group of witnesses. "Those who wanted to get government off our backs ended up taking cops off the beat," he said.

In the House, Energy and Commerce Committee Chairman John D. Dingell (D-Mich.) and Bart Stupak (D-Mich.), who chairs its Oversight and Investigations Subcommittee, released a letter to Lukken commending the CFTC for issuing a special call to obtain more information about passive investments in commodity indexes and single commodities, and for efforts to get more information from ICE Futures Europe and its British regulator, the Financial Services Administration.

"Despite these initiatives, the futures markets remain far from transparent to regulators or the public," the two House members continued. Congress particularly needs to understand the role and activities of sovereign wealth funds in commodity markets to better determine if oil-producing countries may be contributing to upward pressure on commodity prices through undisclosed oil and other investments, they said. Dingell and Stupak asked Lukken 11 questions in their letter and requested answers by June 20.

Four Senate bills

Four separate Senate bills were filed on June 12 and 13 to address possible speculation and increase the CFTC's authority and resources. S. 3130, which Durbin introduced, would give the agency money to hire another 100 employees, make the its inspector general independent, order the US comptroller general to study the international regime for trading energy futures and derivatives and submit a report to Congress within 120 days of the bill's enactment, and require a non-US board of trade selling an energy commodity for US delivery to operate under US regulations.

Several senators at the hearing asked Lukken about specific energy commodity market issues. Ken Salazar (D-Colo.) said an independent oil and gas producer in Colorado wondered why Congress had not increased margin requirements from 5 to 40%. "Margins are a very blunt instrument when used in that fashion and could send many businesses overseas," Lukken replied.

Amy Klobuchar (D-Minn.) asked him if the CFTC would support repealing the provision in the 2000 Commodity Futures Modernization Act which created exempt commercial markets – the so-called Enron loophole – and moved the burden of regulatory proof from traders to the commission. When Lukken said that he did not believe this had prevented the CFTC from investigating market manipulation allegations since the CFMA became law and the agency had won all of its cases, Klobuchar said, "I understand that you have taken measures. I don't understand why you apparently don't want a stronger law."

One difference which emerged was the difference between the CFTC's definition of market manipulation and that of federal lawmakers, which Lukken said might more accurately describe a speculative bubble. "Manipulation in the CFTC's eyes is an illegal act where someone tries to push prices higher without taking any risk. We've seen cases in the past where someone has tried to manipulate a market by holding one leg of their position in clear view while doing something more on the outside," he explained.

Republicans' assessments

Republicans said that the CFTC should be given a chance to implement its new responsibilities. "Mr. Lukken, your challenge is before you can put all the changes in your authority into operation, some people in Congress are trying to push it further," said Sam Brownback (Kan.).

"Simply blaming foreign boards of trade and the CFTC will not lower energy prices," said Saxby Chambliss (Ga.), the Agriculture Committee's ranking minority member. Several bills have been introduced and hearings held about commodity markets and higher energy prices, he pointed out. "We should not rush to legislate an uninformed solution, particularly when we might create more problems by driving speculators into markets from which the CFTC receives no trading data and has no ability to monitor," he said.

Lukken said that the commission already is extending its inquiries into major new areas. When Agriculture Committee Chairman Tom Harkin (D-Iowa) asked about "netting out" by index traders to possibly camouflage their true positions, the CFTC official said: "We typically have not looked markets to get information on traders. Swap dealers take different positions for their clients so this will be unprecedented. We will be going through large investment bank clients' portfolios and trying to determine what they are doing."

The agency is doing this because it is concerned that some investors may be using swaps to evade commodity position limits, he continued. "It's imperative that we get this data. That's why we announced two weeks ago that we were putting out special calls for it," Lukken said.

Contact Nick Snow at

Related Articles

EPA proposes voluntary methane reduction program for gas industry

07/24/2015 The US Environmental Protection Agency proposed a voluntary methane reduction program for the natural gas industry that would allow companies to ma...

Petrobras workers stage 24-hr strike

07/24/2015 Workers at beleaguered Petroleo Brasileiro SA (Petrobras) staged a 24-hr strike across Brazil to protest plans by the state-owned company to liquid...

MARKET WATCH: Oil futures hover below $49/bbl

07/24/2015 Light, sweet crude oil futures prices settled under $49/bbl July 23 on the New York market, which means US prices have slid more than 20% since the...

Separate Murkowski bill addresses crude exports, OCS revenue sharing

07/24/2015 US Senate Energy and Natural Resources Committee Chair Lisa Murkowski (R-Alas.) introduced legislation that would end the ban on US crude oil expor...

OGUK updates guidelines for well abandonments


Oil & Gas UK has released updated guidelines for abandonment of wells, including cost estimates.

MARKET WATCH: Oil futures plunge below $50/bbl


Light, sweet crude oil futures prices plunged lower to settle below $50/bbl on the New York market on July 22.

Cornyn calls for more US energy exports in wake of Iran deal

07/23/2015 US Senate Majority Whip John Cornyn (R-Tex.) said it would be geopolitically, economically, and strategically absurd for the US to maintain outmode...

Post-sanctions Iran initially won’t shake markets up, executive says

07/22/2015 Iran’s resumption of oil and gas exports, once sanctions are lifted under the recently negotiated nuclear limits agreement, probably won’t flood gl...

UAE easing gasoline, diesel price controls


The United Arab Emirates is moving prices of gasoline and diesel toward deregulation effective Aug. 1.

White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts

Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected