In his letter, Mr. Rappaport stated that the Exchange’s primary concern was that the provisions in subsection (h)(3) of section 9 would “likely lead to a migration of energy trading to unregulated markets, thus depriving policy makers, regulators, and the public of currently available information on market participation, concentration, and financial performance.”
He wrote, “With the current focus on nearly historically high energy prices by many policy makers, and their desire to assure themselves that the market is fair and competitive, we question whether Congress has fully considered that the energy exemption provisions included in subsection (h) (3) of Section 9 of the House Agriculture Committee passed version of H.R. 4541 would remove a substantial portion of the energy marketplace from public scrutiny and regulatory oversight.”
Mr. Rappaport continued, “Further, by creating and limiting the energy regulatory exclusion to an electronic system, the legislation has eliminated the ability of existing open outcry systems to compete with the unregulated electronic systems,” he said. “In essence, H.R. 4541 has not only deregulated the energy markets, but has “legislated” the winning market system.”
Mr. Rappaport stated that the Exchange agreed with providing greater legal certainty to over-the-counter energy transactions as outlined in S. 2697, the bill passed by the Senate regarding Commodity Futures Trading Commission reauthorization, but has concerns that H.R. 4541 goes “substantially further,” in direct opposition to the recommendations made by the President’s working group on financial markets. The working group drew a distinction for financial derivatives, which have “virtually inexhaustible supplies,” and is a market that is populated by financial institutions, futures commission merchant affiliates, and Securities and Exchange Commission-regulated broker-dealers, all of whom are subject to other forms of regulatory oversight.
