FMX | Connect – www.fmxconnect.com - (Reported 7/16/2010)

Cameron Hanover was included in an email from Jim Collura, Vice President for Gov’t Affairs at the New England Fuel Institute, where he discussed how the financial reform bill will affect the energy industry. Jim was kind enough to highlight some of the more meaningful changes we will see after President Obama signs it into law. Stay tuned for more developments.

• Fully close the "Enron Loophole" by empowering the Commodity Futures Trading Commission (CFTC) with authority over off-exchange (over-the-counter) derivatives markets, and by requiring across-the-board transparency for all derivatives.
• Require that derivatives be exchange-traded or cleared with real-time reporting, reducing systemic risk and market instability and uncertainty.  The final bill, unlike previous iterations, would also give the CFTC additional tools to enforce this requirement.
• Provide a narrowly-defined hedge exemption for legitimate commercial end-users to clearing and capital requirements for derivatives.
• Close the "Foreign Markets Loophole" by requiring that foreign boards of trade register with the CFTC if they plan on doing business in our markets.
• Provide the CFTC with additional authority to prosecute fraud and manipulation when it occurs. Since its inception, the CFTC has been handicapped by a less-than-adequate legal standard to prove manipulation, especially when compared to the authority provided other agencies and commissions such as the SEC. As a result, the CFTC has only successfully prosecuted one case over the last 35 years. The new measure will remedy this.
• Protects commodity trading “whistleblowers” who cry foul when they see fraud, manipulation or other violations of the law occurring.
• Require banks to "spin-off” their energy swaps trading operations into a separately capitalized entity that cannot access federally insured deposits. Other swaps in commodities (except gold and silver), equities and risky credit default swaps are included as well. This is expected to dampen the willingness of Wall Street speculators to take excessively leveraged positions in commodities, including energy.
• Empower the CFTC to set speculation limits in all markets, and requires them to set aggregate speculation limits across all markets.
• Prohibit “insider trading” in commodity futures, options and swaps on government information that is not yet public or otherwise made available to the trading community.
• Make permanent the CFTC Energy Markets Advisory Committee, which was established in early 2008 at the urging of NEFI and its coalition allies to provide an environment for energy end-users and industry groups to express concerns to regulators.  It further states that hedgers and consumers must be represented on the advisory committee.  Sean Cota (Cota & Cota, Bellows Falls, VT) currently represents our industry on the existing committee.
• Require a study into existing and prospective carbon trading markets.  There has been concern that if government sets a price on carbon through a cap-and-trade scheme or some other method, that such a market could become subject to excessive speculation and volatility, and could become more of an investment opportunity for Wall Street than a tool for reigning in greenhouse gas emissions.  This concern created skepticism among even the most liberal Senators and helped kill an economy-wide cap-and-trade program, at least for now.
• Give regulators one year to enact new rules and regulations, and require them to cooperate and coordinate here there is overlap between multiple agencies.

Jim Collura, Vice President for Gov't Affairs

The New England Fuel Institute (www.nefi.com)

jimcollura@nefi.com

About FMX: FMX Connect is an information, data, and analytics portal for Commodities. The portal provides an all-in-one package including essential market data, independent third party research, industry news, and commodity trading tools. FMX Connect provides efficient, effective, and thorough data that bridges all aspects of commodities onto one screen. The Result; A user friendly application for hedge fund traders, OTC brokers, individual investors, and industry participants
-----
Note: The information presented, while from sources generally believed to be reliable, is not guaranteed and may not be complete. FMX | Connect makes no representations or warranties regarding the correctness of any opinions or information. Past results are not necessarily indicative of future results. Nothing in this report should be construed as a representation to buy or sell shares, futures or options, which contain considerable risks. For internal client distribution only. Any reproduction, re-transmission, or distribution of this report without permission is prohibited. Media correspondents or reporters may not quote any one page or section in its entirety and must attribute all quotes, ideas or concepts herein. Copyright FMX | Connect, ©2009-2010. All rights reserved.