Closing 'the loophole' and opening a can of …

The CFTC said Monday it’s further tightening the Enron Loophole by restricting how large a position in natural gas futures traders can take on the Intercontinental Exchange.
The loophole let traders sidestep limits on NYMEX natural gas positions, which are an attempt to keep one investor from gaining too much control of the market. NYMEX limits natural gas traders to 12,000 net futures and 1,000 in the last three trading days before the contract expires.
ICE is planning to impose such limits anyhow, since exchanges usually “volunteer” to take on new rules when it becomes clear regulators are planning to impose them. Not so sure why ICE didn’t simply beat the government to the punch.
The announcement comes just as the CFTC says it is reversing course on previous statements and will report that oil price spikes are the fault of speculators. They also start two days of hearings into limits of energy trading as part of an effort to head-off “excessive” speculation (good luck finding a definition for that). You can watch them live here.
As we report today there’s a lot of concern in industry about these hearings and how they may impact very useful (and often crucial) hedging and risk management activities.
A summary of the hearing lineup:
Tuesday hearing:
9:00 a.m. EDT and 1:00 p.m. EDT
Panel One:
Jeff Sprecher, Intercontinental Exchange
Craig Donohue, Chicago Mercantile Exchange
Panel Two:
Todd Petzel, Offit Capital Advisors
Ben Hirst, Delta Airlines on behalf of the Air Transport Association
Laura Campbell, Memphis Light, Gas and Water on behalf of the American Public Gas Association
Sean Cota, Cota and Cota, Inc. on behalf of the Petroleum Marketers Association of America
Wednesday hearing:
9:00 a.m. EDT and 1:00 p.m. EDT
Panel One:
Blythe Masters, JP Morgan
Dr. Henry Jarecki, Gresham Investment ManagementDon Casturo, Goldman Sachs
Tyson Slocum, Public Citizen
Panel Two:
John Lothian, John J. Lothian and Company, Inc.
Peter Krenkel, Natural Gas Exchange
Dennis Gartman, The Gartman Letter
Adam Felesky, BetaPro Management
A third hearing is scheduled for Wednesday, Aug. 5.