On February 7, 2014, eight United States Senators told Acting Commodity Futures Trading Commission Chairman Mark Wetjen to either (1) make the CFTC’s Large Trader Report available to the Federal Energy Regulatory Commission by the end of February or (2) tell Congress what needs to be done so that the information can be made available as quickly as possible. Senator’s Letter to Acting CFTC Chairman Mark P. Wetjen.
FERC and the CFTC have entered into a Memorandum of Understanding on sharing information, including the information contained in the CFTC Large Trader Report. Under the CFTC’s Large Trader Reporting System, clearing members, futures commission merchants and foreign brokers file daily reports with the CFTC showing futures and option positions of traders that have positions at or above specific reporting levels (ranging from 25 to over 1,000 contracts, depending on the commodity) set by the CFTC. The aggregate of all large trader positions reported to the CFTC usually represents 70% to 90% of the total open interest in any given market. Once a trader’s account reaches one of the reporting levels, the CFTC may contact the trader directly and require the trader to file a detailed identification report. CFTC staff can then use this information, including aggregation with other accounts of the trader, to assess the trader’s potential impact on markets and compliance with speculative position limits.
But the CFTC has not yet shared that information with FERC, citing technical issues. The CFTC told Congress in mid-January that “there are questions just around data transfer issues and technical personnel need to work out those things.” Testimony of Mr. Vince McGonagle, CFTC’s Market Oversight Director, Senate Banking Committee, January 15, 2014.
The eight Senators, however, oppose further delay telling Chairman Wetjen:
Information sharing between CFTC and FERC has been delayed for too long, putting our energy markets at risk of abuse unnecessarily. During the Western energy crisis, Americans learned that energy markets that lack real-time market oversight and effective regulation allow traders to rob Americans, disrupt economic activity and darken cities. The crisis cost consumers an estimated $45 billion in higher electricity rates, lost business due to blackouts, and a slowdown in economic growth. FERC investigators have explained articulately and effectively that they need access to CFTC’s Large Trader Report in order to oversee trading in fully integrated energy markets and prevent future manipulation. U. S. Senators Letter at 2
They told the Chairman to get moving and either (1) address any “technical issues and initiate information sharing no later than the end of February” or (2) tell Congress about the technical problems and they would fund any needed investments. As the letter concludes:
We ask you to provide the leadership necessary to address technical issues and initiate information sharing no later than the end of February. If the CFTC is unable to facilitate information sharing by that date, we trust that CFTC’s report to Congress [due February 17] will detail how it intends to overcome technical limitations as quickly as possible [which would include any funds needed for upgrades to information technology systems.] Id.
Check back to the blog for further developments.