Friday, 25 July 2014
Last updated 44 min ago
Dec 14 2007 | 12:11pm ET
More than a year after the collapse of Amaranth Advisors, the U.S. Senate has acted to close a regulatory loophole that helped lead to the hedge fund’s spectacular demise. The Senate yesterday approved an addition to a broader farm bill granting the Commodity Futures Trading Commission the power to impose restrictions and reporting requirements on currently unregulated electronic energy-futures markets.
Prior to its collapse last summer, Amaranth was order to limit its natural gas trading on the New York Mercantile Exchange. The hedge fund decided to shift those trades to the unregulated InterContinental Exchange. Bad bets on natural gas wound up costing Amaranth investors more than $6 billion, forcing the firm to shut its doors.
The CFTC asked Congress for the new powers earlier this year. Under the proposal, the agency and other regulators could require electronic markets to report large trades, and could even order them to place size limits on trades. The legislation only covers widely-traded futures contracts, such as those on natural gas.
“Increasing transparency and federal oversight in electronic energy markets is our best bet to deter unscrupulous traders from manipulating energy prices and driving up energy costs for hardworking American families,” Sen. Dianne Feinstein (D-Calif.), one of the provision’s sponsors, said.
The new powers, however, are far from a sure thing. The House version of the farm bill, passed this summer, does not include the measure, and the Senate is set to vote on its version today.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…