REGULATORS NAIL AMARANTH FOR GAS SWINDLE

Was justice served with the check for gluttonizing at the marketplace?

Regulators fine natgas market manipulaters
Tom Doggett and Chris Baltimore, July 26, 2007 (Reuters via Washington Post)

WHO
Chairman Joseph Kelliher, Federal Energy Regulatory Commission (FERC); Commodity Futures Trading Commission (CFTC), New York Mercahntile Exchange (NYMEX), Amaranth Advisors (head trader, Brian Hunter, fellow trader Matthew Donohoe), Energy Transfer Partners LP
Clearly something happened in 2006 to change the course of the market. (click to enlarge)

WHAT
- FERC and CFTC are fining Amaranth traders for manipulating natural gas prices to their own benefit. They are fining Energy Transfer Partners LP for Houston Ship Channel delivery hub gas market manipulations, especially following Hurricane Rita in 2005. Fines approach $500 million from FERC in the Amaranth case and over $200 million in the Energy Transfer case. CFTC has not finalized its fines yet but they are expected to be of similar proportions.

WHEN
- Fine levied July 26.
- Amaranth manipulations were primarily in the spring, summer and fall of 2006. The Energy Transfer swindles were from December 2003 to December 2005 but especially in September 2005, when energy supplies were tight right after the hurricane.

WHERE
- Fines announced in Washington, D.C.
- The Amaranth manipulations were the result of the traders finding a loophole between NYMEX and the Intercontinental Exchange (ICE.N) that they worked to their own benefit.
- The trading hubs where Energy Transfer worked prices were the Houston Ship Channel and Waha, Texas.
- Energy Transfer is based in Dallas.

WHY
- Both manipulations pushed gas prices down, allowing consumers to benefit in the short run but ultimately benefiting only the principals while threatening market intergrity.
- Hedge Fund Amaranth eventually collapsed, leaving investors without $6.4 billion in the hole.
What happened was Amaranth. (click to enlarge)

QUOTES
Kelliher: "For these two companies, failure to refute these findings will confirm that their actions harmed many wholesale market participants, creating losses that ultimately hurt natural gas customers across the country…Manipulation designed to lower prices is as offensive as manipulation that raises prices…"