Financial Regulatory Forum

INTERVIEW – CME proposes energy position limits

By Reuters Staff
September 16, 2009

Craig Donohue, the chief executive of CME Group, speaks during The Globalization of Capitol Markets: The Rise of New Financial Centers panel at the 2008 Milken Institute Global Conference in Beverly Hills, California April 28, 2008. REUTERS/Phil McCarten (UNITED STATES) NEW YORK, Sept 16 (Reuters) – CME Group, the giant Chicago-based operator of derivatives exchanges, would impose new position limits on NYMEX energy contracts in response to a push by U.S. regulators for renewed scrutiny in energy trading, CEO Craig Donohue said in an interview Wednesday.
CME would apply the limits, laid out in a CME White Paper released Wednesday, as long as regulators agree to enforce limits in venues where commodities are traded around the world, and extend them to include over-the-counter commodities swap contracts as well, Donohue said.

He also said exchanges should be allowed to extend hedging exemptions for traders who need to exceed the position limits.

A push by U.S. government regulators to impose tighter position limits in U.S. energy markets may send investment flows offshore or prompt investors to take money out of commodities futures in regulated exchanges, such as those CME operates, Donohue warned.

“Market participants are already beginning to use alternatives. Energy market participants are now using more swap contracts, and we’re seeing a large number of reports about new securities giving investors exposure to commodities without accessing futures markets,” he said. (Reporting by Joshua Schneyer)

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