Received CFTC 

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COMMENT :(j) 

11d3f~7 COMMODITIES FUTURES 

TRADING COMMISSION 

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Maintenance of Books, Records 

and Reports by Traders 

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Docket No. RIN3038-AC22 

COMMENTS OF THE NEW YORK 

PUBLIC SERVICE COMMISSION 

The New York Public Service Commission (NYPSC) hereby submits its 

comments in support of the Proposed Rules issued in the referenced proceeding by the 

Commodities Futures Trading Commission (CFTC) and published in the Federal Register 

on June 22,2007. 72 Fed. Reg. 34413 (June 22, 2007). The purpose of the proposed rule 

is to enhance the CFTC's ability to deter and prevent price manipulation or any other 

disruptions to the integrity of the regulated futures markets. NYPSC supports the 

proposed rule and its underlying purpose. 

I. BACKGROUND AND STATEMENT OF INTEREST 

Given the impact of the natural gas futures market on prices of physical sales of 

natural gas, NYPSC is filing the instant comments in support of the CFTC efforts to 

increase the transparency of trades in the natural gas futures market. Increased 

transparency is essential, particularly in light of the serious issues that have arisen 

recently concerning the influx of speculative investments into energy futures markets. 

NYPSC is concerned about the impact that such activity has had on prices for natural gas 

futures and ultimately on prices paid by consumers for physical deliveries of natural gas. 

A report recently issued by the Staff of the Committee on Homeland Security concluded 

that the large positions and trades held by Amaranth in natural gas futures on the New 

York Mercantile Exchange (NYMEX) and IntercontinentalExchange (ICE) caused 

DB02/759160.01 0017717714.1 
significant price movements in key natural gas futures prices. 1 Such movements in 

natural gas futures markets, in tum, have had a corresponding impact upon prices for 

physical sales of natural gas. 

Given the increases in natural gas prices experienced by consumers over the past 

several years, it is NYPSC's position that the relevant governmental entities must take all 

available steps to prevent market manipulation and ensure the integrity of the natural gas 

market. At the federal level, the Federal Energy Regulatory Commission (PERC) has 

been taking steps to ensure that wholesale prices for natural gas that is transported and 

sold in interstate commerce are determined competitively. The PERC recently issued a 

notice of proposed mlemaking to require buyers or sellers of natural gas to file reports of 

annual natural gas purchases and sales in order to increase price transparency in the 

physical natural gas markets.2 NYPSC filed comments on July 1, 2007 supporting 

PERC's proposal. In those comments, NYPSC noted that while the PERC recognized the 

significant interaction among financial futures and physical natural gas markets, the 

PERC did not require the filing of information on financial transactions because the 

futures market is regulated by the CFTC. In this respect, the PERC noted that it 

communicates regularly with the CFTC pursuant to the terms of the Memorandum of 

Understanding entered into CFTC and PERC on October 12, 2005. 

The CFTC is responsible for ensuring that fraud, manipulation and abusive 

practices do not occur in federally regulated financial markets such as the New York 

1 Excessive Speculation in the Natural Gas Market Staff Report: Hearings Before the Permanent 

Subcommittee on Investigations Committeee on Homeland Security and Governmental Affairs, llOth Congr. 

(2007)("StaffReport") at 2. 

2 See Transparency Provision of Section 23 of the Natural Gas Act, Docket No. RM07-10-000 and 

Transparency Provision of the Energy Policy Act, Docket No. AD06-ll-OOO. 

DB021759160.0 I 0017717714.1 2 
Mercantile Exchange (NYMEX). Consistent with such responsibilities, the CFTC is 

proposing rules which would amend existing CFTC regulations to make it explicit that 

persons holding or controlling reportable positions on a reporting market must retain 

books and records and make available to the CFTC any pertinent information with 

respect to all other positions and transactions in the commodity in which the trader has a 

reportable position.3 By way of example, the proposed rule would make it explicit that a 

reportable trader in the Natural Gas futures contract in the NYMEX must keep books and 

records and provide to the CFTC pertinent information related to positions and 

transactions in Natural Gas on all designated contract markets (DCMs) and derivatives 

transaction execution facilities (DTEFs). NYPSC is specifically interested in ensuring 

that the CFTC has access to the traders' positions in all financial transactions, such as 

those traded on ICE and others, that currently are utilized as alternatives to the NYMEX. 

II. COMMENTS IN SUPPORT OF PROPOSED RULE 

NYPSC supports CFTC's proposal to make clear that traders of Natural Gas 

futures contracts on the NYMEX are required to keep books and records of other 

positions that such trader holds in Natural Gas on ICE. As explained by the CFTC, 

"[i]nformation with respect to positions and transactions in the virtually 

identical Natural Gas contracts on the IntercontinentalExchange (ICE), an 

ECM, also is important to the Commission's ability to conduct effective 

market surveillance of the NYMEX Natural Gas contracts and to determine 

the degree of a trader's exposure in both the NYMEX and ICE natural gas 

markets."4 

NYPSC agrees with CFTC that it is essential to be able to evaluate a trader's 

exposure on both the NYMEX and ICE. Reports of dramatic increases in the amount of 

financial speculation in energy markets, and the collapse of Amaranth in September 2006 

3 72 Fed. Reg. 34413 4 /d. at 34415. 

DB02/759160.01 00/7717714.1 3 
demonstrate the need for CFTC to closely monitor the positions held by traders in energy 

markets. Such monitoring activities by the CFTC should be coordinated with FERC's 

monitoring of physical natural gas sales. 

NYPSC notes its concern, however, that the proposed rule may cause traders that 

currently utilize the NYMEX and ICE to avoid regulatory oversight by trading 

exclusively on ICE. The inability of the CFTC to directly regulate traders that 

exclusively use ICE creates a serious loophole in the effective regulatory oversight of the 

financial markets by the CFTC. NYPSC suggests that the CFTC take steps to monitor 

the migration of traders that currently utilize NYMEX to ICE as the exclusive means of 

trading Natural Gas futures contracts. The availability of such information would be 

useful in the ongoing process of evaluating whether CFTC's existing jurisdiction provides 

the necessary tools to achieve its mission of preventing price manipulation and preserving 

the integrity of financial markets. 

Date: July 23, 2007 

DB021759160.010017717714.1 

Respectfully submitted, 

PUBLIC SERVICE COMMISSION OF 

NEW YORK 

Is/ David D'Alessandro 

David D' Alessandro 

Kelly A. Daly 

STINSON MORRISON HECKER LLP 

1150 181

h Street, N.W., Suite 800 

Washington, DC 20036 

202-785-9100 (phone) 

202-785-9163 (fax) 

Its Attorneys 

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