The US futures industry regulator has hit back at accusations by two influential US senators that it is not adequately policing the US energy markets, saying recent charges against BP North America are a sign that the agency is “going right to the jugular” on cases of market manipulation.
The comments, by Reuben Jeffery, chairman of the Commodity Futures Trading Commission, came in response to criticism of the CFTC by senators Norm Coleman and Carl Levin in a recent senate report into the role of speculators in currently high petrol prices.
The report said that trading of energy futures was increasingly happening away from exchanges and on over-the-counter markets, which are not regulated by the CFTC.
It cited a need “to put the cop back on the beat” by requiring all US traders of OTC energy futures to report large trades to the CFTC and tighten CFTC oversight of such markets. Mr Jeffery said he in an interview with the FT he had “the utmost respect” for the senators. But he said: “I can’t resist taking exception to the notion that the cop has not been on the beat. Our enforcement experience over the past several years belies that notion and shows a strong record of commitment and vigilance in the area of anti-manipulation and false reporting in the energy sector.”
Last month, the CFTC charged BP North America with manipulating a large portion of the propane market in the US. The company denies the charge.
However the charges were the result of information that came to the CFTC from participants in the physical propane market, not the futures markets, the only market where the CFTC has congressional mandate to regulate.
Mr Jeffery said it would be difficult to oversee the OTC markets given the array of different types of bilaterally negotiated products in them, with “different delivery points and payment patterns”.
But he insisted that the BP case was “strong evidence of using our existing authorities to get at bad behaviour in the energy markets, be it on exchange-traded or OTC markets”.
“If the problem is market manipulation of energy prices that affect American consumers we are going right to the jugular when we see evidence of this as an enforcement matter,” Mr Jeffery said.
The CFTC is understood to have spent recent weeks briefing lawmakers in Capitol Hill about the BP case.