Monday, July 27, 2009
CFTC Hearing Will Reveal Little
I would love to be a fly on the wall at tomorrow's CFTC energy speculation hearing - the first of three. Congressman Bart Stupak and some CFTC bodies will speak. One 'witness panel' is being led by Jeff Sprecher of ICE and Terry Duffy of CME (which owns NYMEX), so it will be no surprise when they recommend leaving well enough alone. The other is led by a couple of lightweight petroleum and gas associations, an airline rep and a rep from the Futures Industry Association. I question whether the honorable Congressman or anyone at the CFTC knows enough about the oil business to ask the right questions. Even before the hearings were scheduled Goldman Sachs said it would apply for an exemption to speculative limits because it offers a valuable service to hedgers. (Goldman appears shocked and hurt that anyone would call what it does 'trading'. But its J. Aron commodities subsidiary does not appear to do much in the way of physical oil anymore, so much of its business must be speculative OTC and futures trading...) No doubt Citi will apply for the same exemption for its Phibro division (which DOES still trade physical oil). If the regulators and our Congressman do what I expect, then all of the largest players on the energy futures markets will remain the largest players. Instead of spending all its time worrying about the $100m paycheck of one Andy Hall, the illustrious leader of Phibro, maybe the government should bring him in on the discussion. If anyone knows how much the energy market has changed in the past few years, it is he.