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“Even if we see significant short-run gains in global oil production capabilities, if demand from China and elsewhere returns to its previous rate of growth, it will not be too long before the same calculus that produced the oil price spike of 2007-08 will be back to haunt us again.”
- Dr. James D. Hamilton, Professor, University of California San Diego, Testimony before the U.S. Congress Joint Economic Committee (05.20.09)

“If speculation by long-only index funds did impact commodity futures prices, it is not evident in the empirical evidence available to date. Economic fundamentals, as usual, provide a better explanation for the movements in commodity prices.”
- Dr. Scott H. Irwin, University of Illinois (02.01.09)

“We take the view that all financial markets benefit from having a broad range of participants—providing the overall market remains fair and orderly. In particular, the involvement of a wide range of participants helps support the price formation process and deepens liquidity, which benefits all participants.”
- Memorandum from the Financial Services Authority (FSA) (07.2008)

“The Task Force has found that the activity of market participants often described as “speculators” has not resulted in systematic changes in price over the last five and a half years. On the contrary, most speculative traders typically alter their positions following price changes, suggesting that they are responding to new information – just as one would expect in an efficiently operating market.”
- Interagency Task Force, Interim Report on Crude Oil

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Welcome

IntercontinentalExchange® (NYSE: ICE) is a global, diversified markets operator with multiple regulated exchanges and clearing houses in the U.S., Europe and Canada. ICE serves the risk management needs of commercial participants in energy, agriculture, credit and other key markets, and has a strong history of working with industry and regulators to improve the transparency and efficiency of over-the-counter (OTC) markets and futures exchanges.

An overview of ICE’s exchanges, OTC markets and clearing houses is available here, and a summary of ICE’s regulatory structure with respect to its global energy markets can be viewed here.

OTC energy markets
ICE was founded in 2000 to increase transparency, liquidity and access to previously opaque and illiquid telephone-based OTC energy markets by standardizing contracts and listing them on an electronic platform. In 2002, ICE introduced cleared OTC contracts, which improved the stability of the OTC marketplace by mutualizing credit and default risk in a central counterparty. Today, more than 95 percent of ICE’s OTC business is cleared, and clearing is widely regarded as a model for improving the stability of other OTC markets.

With the passage of the 2008 Farm Bill, ICE’s OTC energy markets are subject to regulation by the Commodity Futures Trading Commission (CFTC) for key contracts, such as the Henry Hub natural gas swap, under what is known as the Significant Price Discovery Contract (SPDC) regime. In 2006, ICE began reporting large trader positions to the CFTC, two years prior to the provision’s enactment into law, making ICE a source of unprecedented transparency in the OTC markets.  An overview of ICE OTC Clearing is available here.

Energy futures
ICE Futures Europe is ICE’s London-based energy futures exchange. It is the largest regulated energy futures exchange in Europe, and the second largest in the world. ICE Futures Europe is a Recognised Investment Exchange and is regulated by the U.K. Financial Services Authority (FSA) with additional oversight by the CFTC for U.S.-linked contracts.

ICE Futures Europe’s benchmark contract, the ICE Brent Crude futures contract, is relied upon to price two-thirds of the world’s physical oil. The exchange also offers a financially-settled West Texas Intermediate (WTI) crude oil contract, although 85%-90% of WTI positions are maintained on U.S. exchanges, where the price for WTI crude oil futures is established each day.

ICE began reporting its WTI positions to the CFTC beginning in 2006. In 2008, the CFTC formally required ICE Futures Europe to adopt U.S.-style reporting, position limits and position accountability levels for energy contracts that reference the settlement price of a U.S. designated contract market. Specific CFTC reporting provisions applicable to ICE Futures Europe are available here.

In the past, certain of ICE’s markets have been the subject of discussions related to so-called “loopholes.” A fact sheet can be found here which provides factual information about regulation of these important markets.

 

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