U.S. Investigates Oil Trading, Despite Unclear Legal Rules
The Commodity Futures Trading Commission has announced it is investigating whether the oil market has been manipulated by energy traders.
Sources told the Wall Street Journal the agency is pursuing multiple oil investigations, many of them related. The CFTC regulates a market that is subject to different regulations than securities trading and where illegality isn’t as clear, according to the article (sub. req.).
One investigation concerns whether traders distorted crude-oil prices by flooding a price-reporting system run by a unit of McGraw-Hill Cos., and then used the distorted prices to profit in other market trades. Another investigation focuses on similar activity in jet-fuel trading.
Yet another probe seeks to find out whether owners of crude-oil storage tanks misrepresent whether the tanks are full, and then make trades to profit on the misleading information.
The article says insider trading generally isn’t illegal in the commodities market, but creating an artificial price to make money can bring charges of market manipulation.
Paul Pantano, a Washington lawyer who represents energy traders, told the newspaper that regulations in the commodities market are open to interpretation. “Commercial parties and speculators are operating in a market where the rules about what is considered manipulative conduct versus legitimate trading activity are not very clear,” he said.
