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Obama to Crack Down on Oil Market Manipulation


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Obama to Crack Down on Oil Market Manipulation

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  #1 (permalink)
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This should be big concern to oil traders in particular number 4. My guess is they will try to squeeze all speculators including the small guy out of the market. Complete stupidity as it will not decrease oil prices by much. It is none of governments business if I personally or a pension fund wants to trade or invest in oil.

"At issue is the increasing role of investment in oil futures contracts by pension funds, mutual funds, hedge funds, exchange traded funds and other investors. Much of that money is betting that oil prices will rise. Analysts say it is possible that such speculation has somewhat inflated the price of oil."

"Last year, as prices rose, Obama and Holder announced the creation of a task force to look into fraud in the energy markets. Obama's plan this time calls on Congress to:

1) Increase six-fold the surveillance and enforcement staff of the Commodity Futures Trading Commission to better deter oil market manipulation.

2) Increase spending on technology to provide better oversight and surveillance of energy markets.

3) Increase civil and criminal penalties against firms that engage in market manipulation from $1 million to $10 million.

4) Give the Commodity Futures Trading Commission authority to increase the amount of money that a trader must put up to back a trading position. The administration officials said such authority could help limit disruptions in energy markets.

In addition, the Obama administration, on its own, will increase access to the commission's data so the White House Council of Economic Advisers can examine and analyze trading information."

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Margin hike(s) anyone....

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"If " they get what they want my guess is they hike margins where big guys can still trade and little guy can't. Essentially accomplishing nothing more but taking away opportunity from little guy.

None of what they do will work to actually bring down price of oil. In fact might raise it.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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There's been several margin hikes on Gold and Silver futures over the last year or so. Quite sharp short term liquiditations but no any longer term effects, mostly just calmed the volatility of the price. I would suspect same type of 'regulatory' actions happening with Crude Oil in the coming months. What it means for a day trader remains to be seen, but in case of Gold & Silver there were really no changes.

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gain247 View Post
There's been several margin hikes on Gold and Silver futures over the last year or so. Quite sharp short term liquiditations but no any longer term effects, mostly just calmed the volatility of the price. I would suspect same type of 'regulatory' actions happening with Crude Oil in the coming months. What it means for a day trader remains to be seen, but in case of Gold & Silver there were really no changes.

Possible but they are trying to bring oil under discretion of "Commodity Futures Trading Commission" as opposed to the exchanges setting margin rates. At least this is the way I understand it. This is what bothers me. Question is will that commission try to push margins so high that it pushes out small traders. They will have very different goals than the exchanges.

I hate the way they only see speculation working to upside when it works both ways. Government should not try to via regulation control pricing in free markets. It is what dictators do.


I have not found oil to be that volatile as of late. Price has climbed and held in somewhat of an orderly fashion mainly because of Iran situation.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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None of what they do will work to actually bring down price of oil. In fact might raise it.

Exactly. I agree with you.

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CFTC has been active in regulating position limits, so that's one obvious way to limit 'big boys' capabilities to run the market. My point with margin hikes was mainly the fact that while overnight margins have been pushed up on Gold & Silver in the past (mainly for volatility reasons) they haven't affected on the day trading margins. To push the markets considerably, you really build multi-day or even multi-month positions. Day trading is mostly 'noise' in that game. However, if you are a swing trader holding positions overnight, I sense there's troubles in the sky with this new regulatory direction and yet-to-be-seen actions.

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gain247 View Post
CFTC has been active in regulating position limits, so that's one obvious way to limit 'big boys' capabilities to run the market. My point with margin hikes was mainly the fact that while overnight margins have been pushed up on Gold & Silver in the past (mainly for volatility reasons) they haven't affected on the day trading margins. To push the markets considerably, you really build multi-day or even multi-month positions. Day trading is mostly 'noise' in that game. However, if you are a swing trader holding positions overnight, I sense there's troubles in the sky with this new regulatory direction and yet-to-be-seen actions.

Good point. If they leave intra day alone will not affect most of us. Lets hope that is the case.

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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Another article

"Oil Prices Could Become More Volatile Under Obama Plan"

President Obama's proposal to clamp down on oil speculation would give the federal government a direct role in how energy markets function and could actually make prices more volatile, analysts say.


The president, under pressure from rising gasoline prices, announced a $52 billion plan Tuesday to strengthen federal supervision of oil markets, including forcing traders to put up more money when they bet on the direction of oil prices.

This so-called margin requirement is intended to limit the amount of speculation in the market, which Democrats and others blame is partially behind the rise in oil and gasoline prices.

Obama's plan plan would dramatically increase the role of the Commodity Futures Trading Commission (CFTC) in regulating US oil markets.

The new rules would allow the CFTC to direct oil exchanges to raise margins in order to address volatility or prevent excessive speculation or manipulation. Currently, margins are set by exchanges in response to changing volatility of the underlying commodity only.


Tuesday’s announcement reflects the idea that margined trading gives too much power to financial investors, says Kevin Book, Managing Director at Clearview Energy Partners.

“It does not appear to recognize the tendency for funds of limited size to move their interest from futures to derivatives when margin requirements tighten and/or commodity prices rise, but it could have the effect of briefly blunting short-term speculative impacts.”

For one group, however, Obama's proposal doesn’t go far enough.

“Wall Street pours hundreds of billions of dollars into the commodity markets every month to speculate and that is causing prices to jump,” Dennis Kelleher, president of Better Markets, a non-profit group that lobbies for more financial regulation, told CNBC.com in an email. “Until Wall Street index fund speculation is stopped, no one is being serious about stopping rising oil and gas prices.”

The role of speculators on market prices has been an ongoing debate in the United States and abroad.

"There is always a focus on gasoline prices and oil market manipulation this time of year, but these are the same energy traders that just knocked natural gas prices to 10 year lows," says gasoline trader Anthony Grisanti, President of GRZ Energy.

"By raising margins prices could be more volatile," adds Grisanti.

This move is in direct reaction to rising oil prices and its negative impact on consumers. Hawaii, President Obama’s home state has the highest gasoline prices in the nation and recently hit a record high of $4.618 per gallon.

Tuesday’s initiative also seeks to increase access to data currently collected by the CFTC but, not freely disseminated because of issues of confidentiality.

The other points outlined in the press release include increased funding for the CFTC to oversee the markets by putting “more cops on the beat” and making upgrades to IT technology for market surveillance. In addition, the plan seeks to increase both civil and criminal penalties for “manipulation in key energy markets”.

News Headlines

"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
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