Washington, D.C. — The House Agriculture Committee today voted to pass provisions introduced by U.S. Rep. Bob Etheridge (D-Lillington) that aim to help ensure that energy costs are not being artificially increased by manipulation and excessive speculation in energy markets.
“A growing number of Americans are asking whether excessive speculation in energy markets is at least part of the cause of skyrocketing gas prices,” said Etheridge. “Today’s bill will give the CFTC the tools to keep our markets free of manipulation and excessive speculation. It will not be a cure-all for our energy prices, but it could help to uncover one cause of high gas prices and hopefully allow for some relief.”
The Committee approved The Commodity Markets Transparency and Accountability Act of 2008, bipartisan legislation introduced by House Agriculture Committee Chairman Colin Peterson and Etheridge. The bill is a result of a series of hearings held by the Agriculture Committee earlier in July to determine if Congressional action would be needed to prevent excessive speculation in energy trading. The legislation includes all of the provisions of a bill previously introduced by Etheridge in June, as well as other proposals put forth during the hearings.
Etheridge is the Chair of the Subcommittee on General Farm Commodities and Risk Management of the House Agriculture Committee, which has jurisdiction over the Commodity Futures Trading Commission, the government agency that is responsible for protecting the public from fraudulent practices in commodity futures trading, including oil and gasoline.
The legislation will take several steps to ensure that unfair market practices aren’t increasing gas prices:
· Give the CFTC 100 additional staff people to weed out potential manipulation and excessive speculation.
· Close the “London-loophole” by giving the CFTC more authority over trading of U.S. energy commodities on overseas markets which are currently not regulated by a U.S. entity.
· Require more disclosure and transparency from investors like index funds and swap dealers so the public can see, in the aggregate, how much these traders influence energy markets.
· Set stricter position limits on energy commodities trading to ensure speculators cannot corner the market.
Fact Sheet
The Commodity Markets Transparency and Accountability Act of 2008
Purpose: To ensure that the recent dramatic spike in energy costs is reflective of the true market forces and is not being artificially caused by market manipulation and excessive speculation.
Problem:
· The Commodity Futures Trading Commission is currently severely understaffed. Since 2000, trading on commodity markets has increased six-fold. However, during that time, the Bush Administration let staffing levels at the CFTC fall to their lowest level in the agency’s 33-year history.
· Because overseas markets are regulated by foreign entities and not directly by the CFTC, some investors are seeking a less regulated market by trading U.S. energy commodities on the ICE Futures Europe market instead of U.S. markets. Some worry that this could be increasing volatility and raising prices on U.S. markets.
· A growing number of hedge funds and other institutional investors have turned their attention and their money to the commodity markets, viewing them as a more lucrative investment than stocks or other securities currently. As a result, questions have been raised about their role in the commodity markets.
The Commodity Markets Transparency and Accountability Act of 2008:
· Provides for 100 additional full-time positions at the CFTC and requests that the President make an emergency spending request to Congress to fund these positions
· Closes the “London-loophole.” Directs the CFTC to hold overseas markets accountable when U.S. energy commodities are traded on them. Ensures that foreign markets have similar disclosure requirements and position limits and accountability levels — which deter excessive speculation — as domestic markets do.
· If a foreign exchange can’t, or won’t, provide the necessary information to the CFTC or accept safeguards that protect the trading of U.S. energy commodities, the bill will require the CFTC to remove the foreign exchange’s computer terminals from U.S. soil, thereby crippling the exchange’s access to U.S. customers.
· Provides more transparency by requiring the CFTC to change its reporting of traders in energy markets to more clearly show what position and how much influence investment funds and swap dealers have in energy markets.
· Provides more transparency in over-the-counter markets, where trades are made off a regulated exchange.
· Requires the CFTC to create stricter speculation limits for energy trading and creates advisory panels for the creation of these limits.