Former Enron trader calls for setting commodities limits

NEW YORK (MarketWatch) — A former Enron trader who now manages one of the world’s biggest energy hedge funds said Wednesday he supports strict limits on financial investors’ trading in commodities futures, backing a view held by some policymakers upset over surging oil prices.

Testifying at the Commodity Futures Trading Commission’s last of three hearings on energy speculation, John Arnold, managing partner of $5 billion Centaurus Advisors, said strict limits should be imposed on the number of physical commodity futures contracts a trader can hold when the contract approaches the expiring month.

For all other months, the CFTC should also set hard position limits on all commodities futures, said Arnold, whose Houston-based firm mainly focuses on natural gas and electricity trading. Limits set by individual exchanges should be replaced by CFTC limits, he said in prepared testimony.

“We depend on a market that is governed by supply and demand and produces a fair settlement price,” said Arnold in prepared testimony. “If we lost trust in the settlement price, we are much less willing to participate.”

MarketWatch