September 24, 2006
The Enron Loophole
Gretchen Morgenson has called for the elimination of the Enron loophole in the CFTC regulation of hedge fund traders. Under the loophole, the energy traders in the over-the-counter markets do not have to file "large trader reports" with the CFTC, only traders in the exchanges (such as the NY Merc) do. The problems at Amaranth Advisors are apparently an argument for closing the loophole. Consider the argument: There is no claim that had Amaranth Advisors made the required filings that the CFTC or anyone else for that matter would have stopped their trading practices. Indeed, there is only minimal understanding as to what the "large trader reports" require and who gets them and what they do with them. Surely we are past an "every failure demands new laws" mentality.
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