US House Energy and Commerce Committee Democrats on Oct. 24 asked the Commodity Futures Trading Commission new questions about the potential impact of unregulated energy commodity swaps and futures on prices.
Committee chairman John D. Dingell (Mich.) and the chairman of two subcommittees, Rich Boucher (Va.) of Energy and Air Quality and Bart Stupak of Oversight and Investigations, noted that the CFTC issued a special call in June to investment banks and index funds for end-of-month data on swaps and index positions beginning Dec. 31, 2007.
The CFTC's staff report on commodity swap dealers and index traders, which was issued on Sept. 11, "summarized a small portion of the data it received on commodity index investments made by pension funds, endowments, sovereign wealth funds, index funds and other institutional investors in 33 energy and agricultural commodities," the three committee members said in a letter to Acting CFTC Chairman Walter L. Lukken.
But the report raises more questions than it answers, they continued, after conceding that the CFTC staff was under pressure "to analyze massive amounts of data in a matter of weeks to meet the commission's Sept. 15 deadline."
"First, CFTC collected seven months of data but only summarized three months of data in its report. It also left out data on the size of the investments in each 'brand' of index. Second, CFTC requested data on single commodity swaps positions but presented no information on these positions. Third, there is no evidence that CFTC validated the data it received," the three federal lawmakers said.
Their questions included how swaps were classified in the report; whether the CFTC or reporting entities such as swap dealers or investment banks assigned the commercial and non-commercial designations; what led to the CFTC's reclassifying a major market participant as a result of the special call, and whether other market participants have been reclassified; and whether the CFTC or the swap dealers made the "futures equivalent" calculations used in the report.
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