The CFTC Energy and Environmental Markets Advisory Committee (“EEMAC”) reviewed important new developments in the energy and environmental derivatives markets. EEMAC discussed new challenges and potential regulatory responses to ensure market integrity, competition and consumer protection.
Key takeaways from the meeting include:
Chairman Massad stated that the timing to finalize the position limits rule has not changed and Commissioner Bowen expressed her desire to finish the rule by the end of the year.
Participants indicated that the current position accountability regime works and a one-size-fits-all stance on estimating deliverable supply is not ideal.
Participants generally agreed that current bona fide hedging practices such as anticipatory merchandising, gross hedging, cross commodity hedging and unfixed price hedges should continue.
Some participants expressed concern over the “economically appropriate test” and its new interpretation in the proposed rule, stating that it does not provide any risk management value.
Lofchie Comment: It is hard to understand how the recent crash in energy prices does not detract from the self-assurance of those who were pushing for position limits based on the view that energy prices were driven by (evil) speculators. Fundamentally, this feels like the imposition of regulation because it can be imposed rather than because it will provide a clear benefit. It is not that we should be fundamentally opposed to increased regulation, but rather that we should be skeptical of it. It is not that the government will run out of things to regulate: why not focus on areas where there is at least some consensus that regulation will provide a benefit?