Wednesday, August 5, 2009

Former Enron trader calls for setting commodities limits

From MarketWatch:
A former Enron trader who now manages one of the world's biggest energy hedge funds said Wednesday he supported strict limits on financial investors' trading in commodities futures, backing a view held by some policymakers upset over surging oil prices.

Testifying at the Commodity Futures Trading Commission's last of three hearings on energy speculation, John Arnold, managing partner of $5 billion Centaurus Advisors, said strict position limits should be imposed on physical commodity futures contracts when they approach the expiring month.

For all other months, the CFTC should also set hard position limits on all commodities futures, said Arnold, whose Houston-based firm mainly focuses on natural gas and electricity trading. Limits set by individual exchanges should be replaced by CFTC limits, he said in prepared testimony.

"We depend on a market that is governed by supply and demand and produces a fair settlement price," said Arnold in prepared testimony. "If we lost trust in the settlement price, we are much less willing to participate," he said.

Those views contrasted with statements from the manager of the two biggest exchange-traded funds backed by energy commodities...MORE