Obama Does Not Heart CME Group or Intercontinental Exchange

Looks like the regulatory noose-tightening we've been speaking of on speculators in the commodities markets, specifically that of the energy kind, are really spanking the 2 large trading pits - CME Group (CME) and IntercontinentalExchange (ICE)


Via Reuters

• The top regulator of U.S. futures markets is considering a clampdown on excessive speculation in energy and commodity trading by restricting holdings of big players, part of a broader move by the Obama administration to stabilize the financial markets.
• William Blair and Co said in a research note that the stocks sank on fears of CFTC imposing restrictions on futures trading, noting that energy futures comprised up to a quarter of revenue for each of the exchanges.

Interesting side note

• Also on the CFTC's radar was commodity ETFs such as the United States Oil Funds(USO) and the United States Natural Gas Fund (UNG). Those ETFs have become so big that at one point USO held more than 20% of Nymex's front-month oil futures contracts.

As we've been stating over and over, we've created Frankensteins in our "financially innovative" system - ETFs are dominating physical markets, and the stock market as a whole I'd argue. What you own means less and less; what ETFs own the stocks you own on the other hand mean more and more... program trades and the vehicles they invest in have changed the game.

• Passive investors increased their crude-oil holdings to the equivalent of more than 600 million barrels in June, up more than 30% from the end of last year, a MarketWatch analysis of Commodity Futures Trading Commission data and the most popular commodities indexes shows. See detailed description of MarketWatch's findings.

No positions

Comments

[Prudent Man...:]

Some of the traders better wake up those fat can executive of their firms who contributed to BHO's campaign to the fact they they cut their own throat. The wanted "change" and they certainly going to get it. They may even have to take the subway instead of a company car.

Once again the "smartest guys in the room" prove to be elitist idiots. Many being lucky their grandparents came first. Wait until they see the FRB looking over their shoulders, their taxes stealing their money and their kids getting awful health care.

This is an Administration that only a collectivist loser can love.

Jul 08 05:23 PM

[Punter Patel:]

Wall Steet analysts will throw in the towels and go with the flow and will forget about long-term future of commodity exchanges. Exchanges are fantastic cash flow generating machines and essentially monopolies. However, they are also one of the most regulated businesses. More than 50% of ICE's 2008 revenues came from energy related products so the investor panic is not irrational owing to concerns around potential legislative or regulatory reform. Following the CFTC’s announcement early this week and similar announcement from Britain and France will limit the upside until some resolution in reached.

Any forced limits will give oppotunities to non-US exchanges to gain the market share as speculators will find their way to speculate. (Singapore Mercantile Exchange will be launching soon and one of their first product is crude oil futures!)

Jul 10 01:45 AM

[Paul H. M.:]

It's nice to see we finally have a President who will defend the average American, who is taxed worse by high-oil prices than by the government.

Keeping oil-related-inflation under control is a major key to our recovery. The stimulus money needs to create jobs for those suffering, NOT flow into the pockets of former TARP participants who use OUR money to manipulate the price of oil.

With an IQ about 3 times as high as Bush and McCain put together, Obama, while seemingly in bed with GS, is our only hope to putting an end to the robbery of every American.

Jul 31 01:03 AM