05-30-2008, 08:01 AM
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Guru
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Join Date: Mar 2008
Posts: 5,272
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Quote:
Originally Posted by danarhea
The Feds have begun an investigation into the manipulation of oil prices. They are also looking into speculation by hedge funds. There are 2 aspects to this:
1) If concrete evidence is found for price-fixing, then IMHO, the Sherman Antitrust Act needs to be invoked.
2) If this turns out to be mostly speculation by hedge funds, then the huge bubble in those funds has probably increased to the point that a burst will be an iron clad eventuality, and will lead to yet another economic crisis.
3) And, in either case, who are the ones getting burned? The consumer, of course.
Article is here. |
As your article points out on page two, this is something that happened on the unregulated ICE (Intercontinental Exchange) that is based in Great Britain, and appears on the surface to be normal arbitrage from the price differences of the US regulated markets and the ICE market.
Quote:
ICE® conducts its energy futures markets through ICE Futures Europe, its U.K. regulated London-based subsidiary, which offers the world’s leading oil benchmarks and trades nearly half of the world’s global crude futures in its markets.
ICE conducts its OTC business directly, and operates its futures business through its wholly-owned subsidiary, ICE Futures Europe, the largest electronic energy futures exchange which is a regulated market in the UK. ICE conducts its soft commodity futures and options markets through its U.S. regulated subsidiary, ICE Futures U.S. All energy futures and cleared OTC contracts are processed through a central clearinghouse – LCH.Clearnet. ICE Futures U.S. products are cleared through ICE Clear U.S.
https://www.theice.com/businesses.jhtml
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Regulation:
Quote:
Regulation
ICE Futures Europe
ICE Futures Europe is a Recognised Investment Exchange in the UK, supervised by the Financial Services Authority under the terms of the Financial Services and Markets Act 2000. As a consequence, the ICE platform supports an orderly, regulated futures market thanks to its wide availability, open participation and complete documentation of all orders. ICE operates its sales and marketing activities in the UK through ICE Markets which is authorised and regulated by the Financial Services Authority as an arranger of deals in investments and agency broker.
ICE OTC
ICE operates its OTC electronic platform as an exempt commercial market under the Commodity Exchange Act and regulations of the Commodity Futures Trading Commission, or CFTC. The CFTC generally oversees, but does not substantively regulate, the trading of OTC derivative contracts on the ICE platform. All ICE participants must qualify as eligible commercial entities, as defined by the Commodity Exchange Act, and each participant must trade for its own account, as a principal.
As an exempt commercial market, ICE is required to comply with the access, reporting and record-keeping requirements of the CFTC. ICE's OTC business is not otherwise subject to substantive regulation by the CFTC or other U.S. regulatory authorities. Both the CFTC and the Federal Energy Regulatory Commision have view-only access to the ICE trading screens on a real-time basis. In addition, ICE is required to:
• Report to the CFTC certain information regarding transactions in products that are subject to the CFTC's jurisdiction and that meet certain specified trading volume levels.
• Record and report to the CFTC complaints of alledged fraud or manipulative trading activity related to certain ICE products that the company receives
• If determined by the CFTC that any ICE markets for products that are subject to CFTC jurisdiction serve a significant price discovery function (i.e. ICE markets serve as a source for determining best market price available for a particular contract at any given moment), ICE must disseminate certain market and pricing information free of charge on a daily basis.
ICE Futures U.S.
ICE Futures U.S., Inc. is a designated contract market pursuant to the Commodity Exchange Act, as amended, and, as such, is regulated by the Commodity Futures Trading Commission. For well over a century, the Exchange has provided reliability, integrity and security in the global marketplace.
https://www.theice.com/profile.jhtml
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Where does the US Government have the authority to regulate an exchange in Great Britain?
They can only look into the ICE Futures that trade in the US market, and there cannot be any "price fixing", as it trades in US dollars. If a company buys seperate contracts on the European Exchange to hedge their US contracts, that isn't "price fixing", and isn't illegal.
Nothing to see here... move along.
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