New twist as court blocks Amaranth

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A US judge on Thursday stoked confusion over the regulation of over-the-counter energy markets by dismissing an attempt by Amaranth, the defunct hedge fund, to confirm that the US futures regulator should be the sole arbiter of whether it manipulated energy markets last summer.

The case is being closely watched because Amaranth, which lost $6bn in natural gas trades, is being pursued by two federal regulatory agencies in two separate proceedings in two different courts – based on the same alleged conduct.

The development will fuel calls for reform of the US system of financial
regulation. Critics say there are too many agencies, often with overlapping powers. They argue this is damaging the global competitiveness of US capital markets.

In July, Amaranth was sued both by the Commodity Futures Trading Commission and by the Federal Energy Regulatory Commission over alleged manipulation of natural gas markets.

Amaranth had asked a judge in a US district court to halt Ferc’s proceeding until the outcome in the CFTC case was known. It argued that the CFTC had primary jurisdiction over the futures markets in which the hedge fund had traded.

Ferc claims it has a legitimate role in the Amaranth case because of the part played by futures markets in influencing the physical markets on which futures contracts are based.

However, Denny Chin, the judge, dismissed Amaranth’s motion, saying the issue should be dealt with by a court of appeal.

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