I was incensed when I saw the press release from ICE yesterday basically begging the CFTC not to employ position limits on certain energy market players. ICE's release pointed out that only last year did the regulator conduct studies that concluded that 'supply and demand' were behind the unprecedented price rises. That part is true, but the 'demand' came from previously uninterested financial markets players who were suddenly very keen to capitalize on rising oil prices. They quickly designed ETFs and ETNs to offer their customers, while also playing the futures markets from their prop desks. Today there are at least 35 ETFs and ETNs for crude oil and products and 10 for natural gas.
ICE's release also, very cheekily in my opinion, stated that index funds (ETNs) and ETFs account for an 'immaterial' amount of ICE's revenue. And that these funds typically execute their trades in 'OTC broker markets'. REALLY? Why does no one ever see them in there trading then? Surely OTC swaps cannot be priced in real-time for ETF or ETN calculations. And why, when I do a cursory search on the web for the holdings of these ETFs and ETNs are they ALL FUTURES?? Have a look at the USO ETF - WTI futures only and the volume has averaged 13.6 million contracts per day of late. The OIL ETN? Futures only - 1.7 million contracts per day. DBE ETF? Futures only - 138,256 contracts. Only the index funds holding oil company shares seem to differ. I think a certain energy exchange is telling porkies for a certain energy exchange's own self-interest. A certain energy exchange thinks we are all mugs, clearly.