Transcripts

The CFTC Heads To The Hill To Announce An Oil Agreement

PAUL KANGAS: The head of the Commodity Futures Trading Commission told Congress today that the tougher restrictions on oil speculators are now in the works. As Darren Gersh reports, the move comes as oil prices have soared and critics have pressed regulators to rein in offshore trading in crude futures.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: When a Senate hearing combines oil and financial markets, you get this -- a capacity crowd of Washington insiders. All of them were eager to learn whether lawmakers and regulators will crack down on speculative trading in oil futures markets. The first bit of news came from acting Commodity Futures Trading Commission Chairman Walter Lukken. He announced his agency has reached a deal to require traders on a key overseas exchange to follow the same rules as oil traders on the New York Mercantile Exchange. Lukken says U.S. regulators will also be getting more information about trading around the world.

WALTER LUKKEN, ACTING CHAIRMAN, CFTC: The benefit is not only do we get to see the U.S. participants on those markets, but we also get to see the foreign participants. It would be completely opaque to us.

GERSH: The CFTC agreement will require big traders to report crude oil positions they take on the intercontinental exchange, or ICE for short. Under a regulatory loophole, ICE is operated out of Atlanta, Georgia, but regulated by the British. Critics have charged speculative trading on ICE is driving up the price of oil, more specifically of west Texas intermediate crude, a key pricing benchmark. It's a charge ICE CEO Charles Vice denies.

CHARLES VICE, CEO, INTERCONTINENTAL EXCHANGE: With a mere 15 percent share of global WTI open interest on a futures-equivalent basis, we feel it is highly unlikely that the ICE futures WTI market is the primary driver of WTI prices.

GERSH: For months, members of Congress have been pressing regulators to take a tougher look at oil trading. And with gas prices over $4 a gallon, senators like Illinois' Richard Durbin are clearly not ready to let up now.

SEN. RICHARD DURBIN, (D) ILLINOIS: If the run-up in crude oil prices is being driven by large trader banks, pension banks and hedge funds, then speculators have more to do with high gasoline prices than Saudi sheiks.

GERSH: Over the last 10 years, Congress has tried to save money by slashing the CFTC's budget. Now, lawmakers say they want to hire 100 new CFTC investigators and put them to work policing trading in everything from corn to crude oil. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.