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ICE was Accomplice in Amaranth Blowup
posted by MR WAVETHEORY at 9/22/2006 09:20:00 AM
Rumors has it that Amaranth used ICE, an electronic commodities exchange, to cover its tracks and avoid regulations that would have helped avoid a blowup. You may recall that Amaranth amassed a huge natural gas position that led to its implosion. Well, it turns out there are regulations in the US that limit idiots from buying too many gas futures. To get around things, Amaranth went offshore. Trades on ICE, the InterContinentalExchange Inc, are not subject to CFTC regulations in US, but instead are regulated by the FSA in the UK.
It was the relative lack of oversight at the ICE that let Amaranth make the high-risk natural gas trades that ultimately turned sour, critics charge. Because of its heritage as an overseas exchange, the ICE is exempt from reporting trading data for over-the-counter trades to regulators at the Commodities Futures Trading Commission. Critics say the loophole permitted Amaranth to aggressively add to its high-risk bet that natural gas prices would rise at a future dateLooks like there may be trouble ahead for ICE. Its bad behavior might torpedo the NYBOT deal which is subject to regulatory approval. Sound like another Refco? Anyone? Bueller? Anyone?