Regulator wins more energy trade oversight

By Tom Doggett

WASHINGTON (Reuters) - The U.S. futures market regulator is set to get more authority from Congress over oil and natural gas trading, which many lawmakers believe will help deter manipulation in energy markets and rein in excessive speculative investing.

The Senate and House of Representatives overwhelmingly approved legislation that closes the so-called "Enron loophole," which allows exempt electronic platforms like the Atlanta-based Intercontinental Exchange (ICE.N: Quote, Profile, Research, Stock Buzz) to trade a host of energy contracts with little government oversight, unlike the regulated New York Mercantile Exchange NMX.N.

Lawmakers backed more oversight as oil prices surge to record highs and more hedge funds use exempt markets to bet on energy prices, two factors in how much consumers pay for gasoline, heating oil and natural gas.

"Right now, there is an orgy of speculation in the energy markets, which drive up prices for consumers and hurt our economy," said Democratic Senator Byron Dorgan.

"Closing this loophole is one important step in our efforts to prevent price manipulation and to wring some of this speculation out of the market in order to put downward pressure on gas prices," he said.

The policy change would allow the Commodity Futures Trading Commission to get more information on exempt contracts that are similar to contracts listed on regulated exchanges and that play an important role in setting prices for the underlying commodities.

The new authority for the CFTC was included in a $289 billion farm bill that the White House has threatened to veto. But the bill garnered enough support in the Senate and House to override any veto.

"This legislation that is being sent to the president's desk puts real teeth back to the CFTC to start looking at some of these energy trades," said Democratic Sen. Maria Cantwell.