US politicians first complained about the ‘London loophole’ in oil futures regulation last year, saying that because the London-based ICE Europe exchange was outside of the regulatory reach of US watchdogs it was potentially ripe for speculator abuse.
Now, data published by the CFTC suggests that positions held by “commercial” traders – who buy or sell oil for their own business purposes – are better represented amongst London-based ICE Europe Futures exchange than among New York-based Nymex.
The data show the share of speculators betting oil prices will rise as a percentage of the market was last week 18.3 per cent in New York, but 9.6 per cent in London. The percentage of traders taking “spread” positions – popular among hedge funds betting on relative price performance of two futures contracts – was also smaller in London, at 14.7 per cent, than in New York, at 22.7 per cent.
So much for the London loophole – back to the physical loophole.