New US trade rule to hit energy markets on Wednesday

03 November 2009 23:18  [Source: ICIS news]

HOUSTON (ICIS news)--Physical energy market participants could get slammed with fines of up to $1m (€680,000)/day per violation under a new US Federal Trade Commission (FTC) anti-manipulation rule that goes into effect on Wednesday.

Market sources said they were concerned the new rule could lead to less transparency and potentially higher gasoline prices at the pump.

Aimed at ending fraudulent reporting in the physical energy markets, the rule “will allow us to crack down on fraud and manipulation that can drive up prices at the pump,” FTC Chairman Jon Leibowitz said when the rule was unveiled in August this year. “We will police the oil markets - and if we find companies that are manipulating the markets, we will go after them.”

Violations include false public announcements of planned pricing or output decisions, false statistical or data reporting, and wash sales intended to disguise the actual liquidity of a market or the price of a particular product, the FTC said. The rule also would prohibit material omissions from a statement that, although true, is misleading under the circumstances.

The rule is intended mainly for the wholesale markets.

The FTC plans to coordinate with the Commodity Futures Trading Commission (CFTC) to watch for manipulation in the regulated futures markets.

Additional reporting by Brian Ford

($1 = €0.68)

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