IntercontinentalExchange, Inc. (NYSE: ICE), a leading operator of global exchanges and over-the-counter (OTC) markets, today responded to Congressional proposals to modify the operation of regulated global energy exchanges.
Sound market oversight and the cooperation between regulators in the U.S. and U.K. are already in place for energy futures markets. The hastily submitted legislative proposals to place arbitrary controls on regulated energy futures markets do not offer short-term relief or long-term solutions to the drivers of crude oil prices. The well-documented rise in worldwide demand for crude oil cannot be impacted by government imposed market controls. The various trading proposals by Senate Democrats would result in adverse consequences for consumers, market prices and on the competitiveness of the U.S. markets.
Markets provide important price signals that reflect the collective real-time views of thousands of market participants, and provide information to producers who rely on the operation of these markets to make long-term investment decisions. Proposals designed to place restrictions on qualified participants would inevitably impact liquidity, leading to the degradation of price discovery, and importantly, increasing the potential for even greater price volatility. The presence of hedgers, and those that are willing to take on the risk that hedgers wish to lay off, are vital to properly functioning markets.
As recently as 2006, the U.S. Commodity Futures Trading Commission (CFTC) held hearings on the issue of foreign boards of trade and subsequently reiterated its view that mutual recognition was beneficial for markets. The resulting mutual recognition system is now a cornerstone of CFTC policy. Since 1982, the CFTC has actively engaged with regulatory agencies around the world to ensure fair and open access to global markets. Hastily enacted legislation that seeks to alter well-established regulatory policy could greatly impair the functioning of commodity markets to the detriment of American consumers.
Global demand, supply constraints and evident geopolitical risks, if coupled with proposed market limitations, would do nothing to lower, anduld do nothing to lower, and may actually increase, oil prices. ICE respectfully urges members of Congress to focus their efforts on developing long-term and permanent solutions to reduce U.S. dependence on foreign oil through sustainable initiatives such as incentives to increase consumption efficiency, the introduction of new energy sources and technologies, and environmentally responsible drilling in North America.