A diverse coalition of Maine citizens, civic organizations, newspaper editors, traders and oil dealers, are demanding that Republican Senior Senator Olympia Snowe take action to end rampant unregulated speculation in energy futures. http://bangornews.com/news/t/news.aspx?articleid=158194&zoneid=5
they're not talking about ending speculation in energy altogether. they're talking about ending spec in unregulated OTC marketplaces that can be highly manipulative, and bringing trade back to nymex. as an exchange player i'm all for it
Exactly. We all know who this is targeted at. I'd think Nymex wants this. The fact is that Amaranth abused this loophole and maintained positions that would have been reportable to the public through exchanges regulated by CFTC.
Of course wall street and hfs wont want it because it would force transparency and hurt there profits. Everyone wants to do secret and opaque deals that no one can figure out. If the US was smart we would force as many things as possible onto exchanges and make counterparty and transparency a priority. Instead we are going to wait until the global banking system nearly collapses or collapses because no one can figure out who owes each other what
I have a Question. the OTC market is too big (the biggest in the world), Do they really need to deal with the US when they can do their OTC Busisness in london or dubai or hong kong without a problem?... thanks in advance.
You hit the nail on the head. If the US tries to increase regulation, the liquidity will simply shift to London, Singapore, Calgary, etc. There is plenty of liquidity in look-a-likes (essentially identical to NYMEX contracts except they're bilateral and cash settled) in the OTC market, enough that most of the major players in energy (the ones that are supposedly manipulating the energy markets) don't need to trade NYMEX contracts. Not to mention, much of the activity in energy trading is in contracts that aren't listed on NYMEX or ICE i.e. basis swaps, structured products, exotic options, etc...95% of my book consists of refined product swaps and options that reference Platts, Argus and OPIS and aren't available on NYMEX or ICE, although many of them can be cleared via Clearport. Having said that, most in Washington, as well as the various trade and consumer groups, that are advocating increased regulation, are too ignorant to realize that the energy markets (save natural gas, to an extent) are global markets and that it would be pretty easy for the major banks, funds and energy companies to simply shift their trading to offices and entities that aren't subject to US regulations which, in turn, could reduce transparency and liquidity in the US and could, arguably, lead to the potential for more "manipulation" than exists in the current environment. Unfortunately (or fortunately for some of us, I suppose) they're using Amaranth as their primary case study so they aren't looking at the big picture, rather their efforts are focused on nat gas look-a-likes traded on ICE. If these groups had any idea how many trades are done via IM or over the phone they'd quickly realize that they're fighting an uphill battle.
If "speculators" push crude oil from $100 to $50 in the coming year, would speculators be blamed for this as well? Sure, speculators have added to higher energy prices but it can't be ignored that most commodities have moved significantly higher over the past few years, it's not just energy. Not to mention the USD that has been beaten to death but an extremely weak dollar isn't "good news" so the general public doesn't hear much about it. If Americans held and purchased their energy in EUR (or CAD/GBP) we probably wouldn't be having this discussion...
Thank you very much petrotrader! Big level of demagoguery in washington (both parties) today. Not to long ago US was the place to do deals, Today is a very big pain in the ass.
definitely a good point, and easy for a small independent spec to miss. how can tiny independent specs compete with such a fragmented and opaque market? maybe 'dark' is the right adjective if you were confined to the nymex petrotrader (not on a wholesale MM level, just small directional spec confined to exchange price data), could you still conduct a robust business in energy contracts? are the nymex/cme energy contract positions identifiable by high volume MM's via clearing codes, etc? do houses share or consolidate this info? over the last 6-10 months, i've been able to identify quantitatively robust directional edges in refined products and exploit them for several weeks at a time, but repeatedly wind up getting picked off and run into the ground after a few weeks of exploiting them. can't seem to hold an edge, and this is really straight forward, under-engineered stuff - not a curve fit situation