Senators move to establish stronger federal oversight of energy markets
A group of US senators yesterday introduced legislation, called the Energy Market Oversight Act, that seeks to restore the Commodity Futures Trading Commission’s (CFTC) authority over online and bilateral energy trades and give the Federal Energy Regulatory Commission (Ferc) powers to investigate and punish possible instances of fraud and manipulation in the over-the-counter energy markets.
The act is, in effect, a resurrection of last year’s Feinstein-led proposals to impose tighter control of the OTC markets in the wake of Enron’s collpase and the California power crisis. Her proposals were defeated in a routine procedural vote in April 2002 that required 60 affirmative senate votes for her legislation to advance.
“The legislation would close a loophole that allows energy trades to take place online with no transparency, no record keeping and no audit trail – with no federal oversight to guard against fraud and manipulation,” Feinstein said.
In 2000, Congress passed the Commodity Futures Modernization Act, which essentially exempted online and bilateral energy and metals trading from regulatory oversight. This loophole, the senators argue, allowed energy companies – such as EnronOnline – to trade billions of dollars worth of energy derivatives with no regulatory oversight. Their proposed legislation would increase notice, reporting, bookkeeping and other transparency requirements, and require energy companies to maintain sufficient capital to cover trades commensurate with risks.
The bill also seeks to prohibit 'wash trades', a practice that gained notoriety last year as a number of firms were found to be trading the same asset at the same price to boost trading volume figures. If the legislation passes, wash trades would be subject to civil penalties for each violation, and those found guilty could be imprisoned for up to 10 years. In December 2002, a former El Paso natural gas trader was indicted for reporting fictitious natural gas transactions to an industry publication, and Dynegy, Duke, El Paso, Reliant, CMS, and Williams have all admitted to engaging in wash trades.
The legislation also seeks to authorise Ferc to fine companies that do not comply with requests for information. This is the same authority that the Securities Exchange Commission has over financial institutions.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Risk, portfolio margin, regulation: regtech to the rescue
A white paper outlining the complexity of setting the course for risk, margin and regulation
Prop shops recoil from EU’s ‘ill-fitting’ capital regime
Large proprietary trading firms complain they are subject to hand-me-down rules originally designed for banks
Revealed: the three EU banks applying for IMA approval
BNP Paribas, Deutsche Bank and Intesa Sanpaolo ask ECB to use internal models for FRTB
FCA presses UK non-banks to put their affairs in order
Greater scrutiny of wind-down plans by regulator could alter capital and liquidity requirements
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Japanese megabanks shun internal models as FRTB bites
Isda AGM: All in-scope banks opt for standardised approach to market risk; Nomura eyes IMA in 2025
CFTC chair backs easing of G-Sib surcharge in Basel endgame
Isda AGM: Fed’s proposed surcharge changes could hike client clearing cost by 80%
Most read
- Revealed: the three EU banks applying for IMA approval
- Top 10 operational risks for 2024
- Industry urges focus on initial margin instead of intraday VM