Amaranth blurred holdings, says Senate

Amaranth Advisors used a loophole to cloud details of its massive natural gas holdings, according to a Senate subcommittee report released today. In a nine-month investigation, the Permanent Subcommittee on Investigations examined millions of trading record from the Intercontinental Exchange and the New York Mercantile Exchange, analyzing prices through 2006. The bipartisan subcommittee found that Amaranth held hundreds of thousands of natural gas contracts, dominating the market from the early part of the year until its September 2006 collapse. At some points, the hedge fund held 100,000 contracts in a single month and at least 40% of the outstanding contracts on NYMEX. The subcommittee found that Amaranth used a legal loophole to dodge oversight. As part of the 2000 Commodity Exchange Act, ICE is exempt from regulation by the Commodity Futures Trading Commission. Amaranth traded heavily on ICE, so neither the CFTC nor NYMEX had complete information about the hedge fund’s natural gas holdings or trades. “Current commodity laws are riddled with exemptions… that make it virtually impossible for regulators to police U.S. energy markets,” said Sen. Carl Levin, D-Mich., in a statement. “We need to put the cop back on the beat in all U.S. energy markets with stronger tools to stop price manipulation, excessive speculation and trading abuses.”