London, 17 November 2009 

Looming U.S. legislation expected to limit commodity trading positions should be an effective way to target market concentration, rather than speculation, the head of IntercontinentalExchange said in an interview. 

ICE rival the New York Mercantile Exchange (NYMEX) itself places limits on positions and collects daily reports on large positions.

New rules, which could emerge in December, are expected to make U.S. regulator the Commodity Futures Trading Commission responsible for imposing position limits and agreeing any exemptions to them.

"They are interpreting the law and taking the authority for limit setting. That is the position the ICE has advocated," ICE Chairman and Chief Executive Jeffrey Sprecher told Reuters. "I think the CFTC has taken their time to study the market."

Sprecher, who gave testimony to CFTC hearings, said the new rules would be focused on limiting the market share of any one player, rather than curbing speculation, whose price impact was extremely difficult to prove.

"It seems more to be about concentration," he said. The drive for tighter regulation of energy and other financial markets follows last year's oil futures rally to a record high and the global economic crisis.

Sprecher's stance contrasts with comments last month from Terry Duffy, executive chairman of the CME Group, which owns NYMEX.

Speaking to reporters in Singapore, Duffy said the CFTC's new rules could drive players to unregulated over-thecounter platforms, which would run counter to the aim of improving market transparency.

Sprecher was also more forthright than investment banks, who together with major oil companies were among the founding shareholders of the ICE when it was set up in 2000.

Banks, holders of some big commodity trading positions, have been mostly reticent about the possible impact of new regulation.

Brent Vs. US Crude

The ICE's prominence in the energy world grew after it bought in 2001 the International Petroleum Exchange, where benchmark Brent futures were traded, thereby acquiring what some -- including ICE -- argue is the truly global oil trading benchmark.

Trading volumes in the contract have soared since the ICE became the first fully electronic energy exchange in 2005. They rose to nearly seven million in October this year, according to the latest data from ICE, up from around 6.4 million for the same month a year ago.

U.S. light crude traded on NYMEX is still by far the more liquid contract, with volumes above 13 million in October.

Some commentators have said the prospect of regulation in the United States has this year increased the appeal of the Brent contract traded on ICE, which is subject to regulation by British regulator the Financial Services Authority, rather than the CFTC.

As contracts based on European crude and products, ICE Brent and ICE gasoil do not come under the CFTC's jurisdiction.

It is unclear whether the FSA will follow the CFTC's lead and enforce strict position limits on European contracts.

Sprecher said the more compelling reason for any shift towards Brent was the land-locked nature of U.S. light crude.

"WTI has been flawed by physical limitations including storage problems," he said.

NYMEX had no immediate comment, a spokeswoman said. Sprecher argued the announcement last month by Saudi Arabia it was dropping a U.S. light sweet crude oil benchmark as the basis for pricing its sales to the United States for the Argus sour crude index was also a victory for Brent.

BWAVE, a weighted average of Brent futures prices, will still be used for pricing some Saudi Arabian crudes.

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