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US Senators seek curbs on London trading in oil futures

telegraph.co.uk

US Senators seek curbs on London trading in oil futures

By James Quinn in New York

Last Updated: 1:31am BST 01/06/2008

 

 

Two leading US politicians are pushing for tighter controls on London’s oil community by handing the American Commodity Futures Trading Commission (CFTC) a remit to regulate trading on foreign energy exchanges.

  Senators Carl Levin and Dianne Feinstein
Carl Levin and Dianne Feinstein: both senators are keen to 
reduce the amount of speculative energy trading

Senators Carl Levin and Dianne Feinstein intend to close the “London loophole” by empowering the CFTC to impose speculative limits on US traders who use London exchanges. The move is aimed at helping to prevent price manipulation and excessive speculation in the oil market.

The senators’ aim goes one step further than the CFTC’s current investigation into the US crude oil market, which was announced on Thursday, by giving the American futures regulator the power to intervene in trading activities that occur outside its own legal jurisdiction.

Both politicians are keen to reduce the amount of speculative energy trading, which they believe pushes up the price of crude oil, and so petrol prices, unfairly hurting their constituents.

The US already places limits on speculative energy trades, but such trades are not caught if they are carried out beyond US borders.

Levin said: “The traders can do it by using computer terminals that are located in the US but provide direct access to the London exchange.”

The proposed new law will require foreign exchanges that operate trading terminals in the US to comply with US speculative trading limits and reporting requirements.

The Bill is aimed in part at the London-basedICE Futures Europe, the former International Petroleum Exchange, which conducts the majority of trade in oil done through London, and which uses terminals in the US where traders can trade US crude oil in London.

In a statement, ICE said: “Sound market oversight and cooperation between regulators in the US and UK are already in place for energy futures markets.

The hastily submitted legislative proposals to place arbitrary controls on regulated energy futures markets do not offer short-term relief or long-term solutions to the drivers of crude oil prices.

The rise in worldwide demand for crude oil cannot be impacted by government-imposed market controls.”

A spokesman for Feinstein, who represents the state of California, confirmed on Saturday that although she believes the CFTC’s investigation is a start, more needs to be done.

“She also believes it’s critical that we don’t allow the London electronic exchange [ICE Futures Europe] to be used as a loophole.”

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