June 22, 2008 6:45 pm

ICE chief warns on oil trading crackdown

The US will drive oil trading overseas if it is too heavy-handed in regulating energy futures markets, according to Jeff Sprecher, chief executive of the InterContinental Exchange, the Atlanta-based electronic commodities exchange.

ICE has been the target of criticism in the US in recent weeks, accused of enabling traders to manipulate oil markets and push up fuel prices by taking large positions on ICE Futures Europe, its London-based subsidiary.

About 15 per cent of all futures trading on the benchmark West Texas Intermediate contract takes place on ICE Futures Europe. ICE Futures Europe is regulated by the Financial Services Authority, the UK watchdog, rather than its US counterpart, the Commodity Futures Trading Commission.

Angered at what they see as the FSA’s lax approach to regulation, a handful of US lawmakers have condemned a “dark market” that enables US-based traders to avoid the CFTC’s oversight. The FSA and CFTC have agreed to collaborate more, but legislators on Capitol Hill are considering proposals to extend US regulation over the “London loophole” or to close it.

Last week, five US senators introduced the “Close the London Loophole Act”. A separate and more extreme bill proposed by another senator, Maria Cantwell of Washington, would extend the CFTC’s jurisdiction overseas.

Mr Sprecher said he feared the effect of more stringent measures. “Our fear is that we’re regulated by 55 different regulators that each want you to do something differently and in so doing they destroy the market.”

Sir Bob Reid, chairman of ICE Futures Europe, will testify on Monday at a hearing of the US House of Representatives’ energy and commerce committee.

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