Centaurus’ Arnold Backs Natural Gas Trading Limits

Aug 5 2009 | 11:56am ET

The founder of energy hedge fund Centaurus Advisors is backing limits on speculative natural gas trading.

John Arnold is expected to make his recommendations at a Commodities Futures Trading Commission hearing today, one of two hedge fund managers expected to tell the regulator what it wants to hear: that speculative energy trading needs to be curbed.

Arnold will tell the CFTC that the New York Mercantile Exchange made a mistake in limiting traders’ positions in financially-settled natural gas contracts. Instead, he says regulators should limit trading in NYMEX physical delivery contracts, which currently creates “potential for abuse.”

“There is no reason why a hedger or speculator needs to trade physical delivery contracts if financially settled contracts are available at the same price.”

At the same hearing, hedge fund manager Michael McMasters is expected to go further than Arnold, calling for an outright ban on “passive investors” from trading the underlying commodity of a contract.

CFTC Chairman Gary Gensler seemed to side with McMasters, saying that “position limits should be consistently applied across markets.”


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