Senator discloses confidential CFTC trading data from 2008

Section:

Senator's Leak Sparks Commodities Debate

By Greg Meyer
Financial Times, London
Sunday, August 21, 2011

http://www.ft.com/intl/cms/s/0/645a8228-caad-11e0-94d0-00144feabdc0.html

A US senator's public release of confidential data on energy traders has sparked debate over how much should be disclosed about commodity markets, where positions are usually a closely guarded secret.

Last week Bernie Sanders, a Vermont independent, leaked and later posted on his website lists of trading positions in oil, natural gas and other commodity markets as part of a campaign to force a clampdown on commodity speculation.

The disclosures contained details from 2008, when crude oil was on the doorstep of a record $145 a barrel and the Commodity Futures Trading Commission had just begun surveying positions in the privately negotiated swaps market.

Included on the list are Wall Street banks, trading houses, oil companies, and hedge funds.

... Dispatch continues below ...



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"We believe all of this information should be transparent and open to the public," said a senior policy adviser to Mr Sanders. "Sunlight may be the best disinfectant. The problem is that this information is confidential in the first place."

In US equity markets, investors must disclose large positions in individual stocks. But in futures markets, market participants submit information anonymously. The CFTC publishes weekly reports on commodity markets with holdings for categories such as swap dealers and hedge funds, but does not identify individual traders.

"I think that the public, policymakers, and markets themselves would be better served if company-specific information was in the public domain," said Tyson Slocum of Public Citizen, a Washington watchdog.

While barred from publicly naming traders, the CFTC is required to provide confidential information to Congress. People familiar with the matter said Mr Sanders' office obtained the confidential information after it was turned over to a committee in the US House of Representatives. The CFTC declined to comment.

"Instances like these raise market participants' concerns over the government's ability to maintain strict confidentiality of regulatory information and customer trading information," said CME Group, the exchange operator.

Next month the CFTC is set to begin gathering even more information on trading in previously unregulated commodity swaps.

"The regulators have every right to know what each and every participant is doing in the market, but disclosing that information to other traders will have a severely negative effect on their ability to collect the information necessary to oversee the markets," said John Damgard of the Futures Industry Association.

The data released by Mr Sanders showed that on June 30 2008 Wall Street banks such as Goldman Sachs, Morgan Stanley, and Barclays held the biggest positions in US crude oil, though their net positions were a mix of long and short positions. Front-month crude fell 21 cents that day.

Other big reported oil traders included SemGroup, the Oklahoma oil pipeline company that went bankrupt the following month after $3 billion in oil trading losses. Hedge funds including Bridgewater and D.E. Shaw, as well as public pension funds, are also included on the list.

Bankers said the list of energy market positions, isolated to benchmark contracts for crude, heating oil, gasoline, and natural gas, failed to capture swap contracts linked to more obscure delivery points that in some cases offset the value of their reported holdings.

* * *

CFTC Report Reveals Rampant Speculation in Oil Markets

Press Release
Office of U.S. Sen. Bernie Sanders
Friday, August 19, 2011

http://sanders.senate.gov/newsroom/news/?id=e802998a-8ee2-4808-9649-0d97...

Sen. Bernie Sanders offered the following statement after having reviewed a list of speculative oil traders responsible for the 2008 spike in oil prices. This list was compiled by the U.S. Commodity Futures Trading Commission (CFTC).

"This report clearly shows that in the summer of 2008 when gas prices spiked to more than $4 a gallon, Goldman Sachs, Morgan Stanley, and other speculators on Wall Street dominated the crude oil futures market causing tremendous damage to the entire economy," Sanders said. "The CFTC has kept this information hidden from the American public for nearly three years. That is an outrage.

The American people have a right to know exactly who caused gas prices to skyrocket in 2008 and who is causing them to spike today. The CFTC claims they need more data to impose speculative position limits as required by Dodd-Frank. That is laughable. The American people need action to bring down gas and oil prices and they need it now, which is why I have introduced legislation with eight co-sponsors to do just that."

On June 15, 2011 Sen. Sanders introduced a bill titled the "End Excessive Oil Speculation Now Act of 2011", which would force the Chairman of the CFTC to impose strict limits on the amount of oil speculators can trade in the commodity and futures markets.

Excessive oil speculation is widely considered to have been a major contributor to high gas prices at the pump and unnecessary volatility in the oil commodities and futures markets. Sen. Sanders' bill currently has eight co-sponsors: Sens. Bill Nelson (D-Fla.), Richard Blumenthal (D-Conn.), Jeff Merkley (D-Ore.), Al Franken (D-Minn.), Sheldon Whitehouse (D-R.I.), Ben Cardin (D-MD), Barbara Mikulski (D-MD), and Jay Rockefeller (D-WV).

"We have a responsibility to do everything we can to lower gas prices so that they reflect the fundamentals of supply and demand and bring needed relief to the American people," Sanders said.

* * *

To view the CFTC report cited above:

http://www.gata.org/files/CFTCExhibits7and8.pdf

* * *

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Lewis E. Lehrman on How to Solve the U.S. Debt Problem

Lewis E. Lehrman, chairman of the Lehrman Institute, sponsor of The Gold Standard Now project, advises that to reduce the $1 1/2 trillion U.S. deficit, the Republican Party must initiate an investment program.

Working Americans are not saving, which enables the banks to lead the country into a cycle of debt, leverage, boom, panic, and bust.
"
Lehrman says: Eliminating the budget deficit of a trillion and a half dollars cannot be done overnight. The proposal by U.S. Rep. Paul Ryan was very dramatic -- one Republican called it radical -- but it was not happily received. The solution, of course, is to design an American program for prosperity, because you can solve these entitlement problems with a growing economy. We need a tremendous program of investment, and investment comes from savings. When you pay savers, middle-income professionals, and working people 0 percent at the bank, you are not going to encourage them to save. Then we are left with a bank cycle of debt, leverage, boom, panic, and bust."

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