Magazine article Modern Trader

CFTC Acts on Enron, Crackdown Elsewhere

Magazine article Modern Trader

CFTC Acts on Enron, Crackdown Elsewhere

Article excerpt

Commodity Futures Trading Commission (CFTC) Chairman Jim Newsome has maintained all along that the CFTC has authority to investigate Enron for fraud and manipulation and no legislation giving the CFTC additional authority was warranted. While the investigations are not complete, the CFTC charged Enron and one of its desk managers in March with manipulating natural gas prices and operating an illegal futures exchange through its Enron online (EOL) platform.

The charges contend that Enron VP Hunter S. Shively on July 19, 2001, purchased for Enron through EOL an extraordinarily large amount of Henry Hub spot market natural gas within a short period of time, causing artificial prices in the spot market as well as in the New York Mercantile Exchange (Nymex) natural gas futures market.

CFTC Director of Enforcement Greg Mocek calls the charges the first step in addressing Enron's alleged violations and notes that the CFTC's investigation is ongoing. "As individuals and their culpability are found we will seek to amend the complaint," he says.

CFTC Regional Counsel Stephen Jay Obie says Enron and Shively met the criteria needed to charge them with manipulation. That criteria is that: 1) they had the ability to influence prices, 2) they intended to manipulate prices, 3) artificial prices existed, and 4) they caused the artificial prices.

Charges of operating an illegal futures exchange stem from a modification made to EOL in September 2001, which allowed users to post bids and offers, effectively transforming it from a bilateral OTC market to a multilateral futures market. …

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