Nymex `Outraged' by House Bill's Effect on Energy Futures
New York, Oct. 20 (Bloomberg) -- Enron Corp., Morgan Stanley
Dean Witter & Co. and other large firms would have an unfair
advantage over traders on regulated energy futures markets under
legislation pending before the U.S. Senate, the chairman of the
New York Mercantile Exchange said.
The world's largest energy exchange opposes the legislation
passed by the House last night because it would let companies
trade futures and derivatives electronically without following the
rules Nymex must obey, Nymex Chairman Daniel Rappaport said in an
interview.
The measure is designed to reduce futures rules and prevent
the government from regulating complex investments known as over-
the-counter derivatives. Most futures exchanges and some banks and
securities firms say if Congress doesn't approve the bill, the
multitrillion-dollar market will move overseas.
The legislation faces opposition in the Senate in the closing
days of the current session of Congress over securities law
provisions. Enron and other large energy companies have joined
Wall Street firms in supporting the bill.
``We are particularly outraged by the provisions of the bill
that discriminate against the established open outcry institutions
in favor of the electronic marketplace as a result of intense
lobbying by a small group of vested interests,'' Rappaport said.
Nymex is urging the Senate to amend the legislation to give
traders on traditional exchanges such as the Nymex the same relief
from regulations that is granted to electronic exchanges, he said.
The Senate Agriculture Committee approved similar legislation
this summer. Committee spokeswoman Tiffany Steele said a
compromise bill is likely to be drafted by Monday, with a floor
vote possible before Congress adjourns on Wednesday.
Senate Prospects
OTC derivatives are private contracts based on an underlying
bond, security, commodity, currency or other asset. Though similar
to regulated futures, the instruments aren't directly governed by
any laws or rules.
A lobbyist working to keep OTC derivatives free of regulation
said he doesn't expect Nymex's objections to derail the
legislation.
``I do not believe that this bill will be stopped based on
the energy exemption,'' said Edward J. Rosen, partner with Cleary,
Gottlieb, Steen & Hamilton, who represents derivatives dealers
such as Citigroup Inc. and Goldman Sachs Group Inc. ``Nymex's
concerns can be readily addressed administratively.''
The legislation faces other problems in the Senate. The
Senate Banking Committee chairman, Phil Gramm of Texas, and the
Securities and Exchange Commission -- backed by the Treasury
Department -- disagree on how much power the SEC should have over
OTC derivatives.
Morgan Stanley and others have urged passage of the
legislation, even though electronic trading of energy derivatives
already is being conducted without regulation by the CFTC.
IntercontinentalExchange
In May, IntercontinentalExchange -- backed by Morgan Stanley,
Royal Dutch/Shell Group and others -- received the go-ahead from
the CFTC to create a Web-based exchange for OTC derivatives based
on metals and oil outside of CFTC rules.
The site, intercontinentalexchange.com , began trading
gold and silver at the end of August, crude oil and refined oil
products last week and power and natural gas this week, said Chuck
Vice, the company's vice president of business development in
Atlanta.
Supporters of the legislation want to make sure that CFTC
permission for such trading can't be rescinded.
OnExchange Inc., based in Waltham, Massachusetts, has asked
the CFTC for permission to trade Treasury note futures by computer
and plans to offer energy products next year.
Meanwhile, Nymex itself is developing electronic trading
through a proprietary computer system, though the site,
www.enymex.com, hasn't yet started operation. |
