CFTC market oversight. Therefore all taxpayers should pay for it. If the CFTC needs additional
resources, the Administration should request and Congress should appropriate the necessary
funds. But imposing an arbitrary and egregious tax that would be borne most by those that
provide the liquidity that allows futures markets to serve so many public interests is a bad idea
whose time should never come.

Thank you for holding this hearing and for considering our views. I would be

happy to answer any questions you might have.


STATEMENT OF FUTURES INDUSTRY ASSOCIATION
BEFORE THE COMMODITY FUTURES TRADING COMMISSION
ON OVERSIGHT OF ENERGY MARKETS

SEPTEMBER 18, 2007

Chairman Lukken and members of the Commission, I am John Damgard,
President of the Futures Industry Association. I am pleased to appear before you at this
important hearing on the oversight of trading in energy futures and other related derivative
contracts. FIA’s member firms play many different roles in the trading and clearing of energy
transactions, both as intermediaries and principals. We have a substantial interest in energy
markets and commend Acting Chairman Lukken and the Commission for holding this public
forum to allow a full spectrum of views to be heard.

Everyone agrees that the price of energy is a critical element of our national
economy. For decades, energy futures have served our national interest by providing a means
for efficiently managing and reliably discovering energy prices. The Commission should take
pride in its effective oversight and stewardship of these markets.

In recent years, energy markets have experienced considerable innovation and
increasing competition. Congress addressed these forces when it enacted the Commodity
Futures Modernization Act of 2000. The CFMA allows different levels of regulation to apply to
different forms of derivative transactions in different commodities that are executed in different
ways. This scaled-regulatory approach was designed to serve equally well the public interest and
various commercial interests. In FIA’s view, the CFMA has worked very well for markets

generally and energy markets in particular.


In energy, the CFMA has made it possible for new markets to compete with
established exchanges. That competition has caused those exchanges to modernize through
electronic trading or at least increase their pace of modernization. The CFMA has also
encouraged innovative thinking by established exchanges and new trading platforms. The result
is that those trying to manage energy price risks and those willing to assume those risks now
have more choices than ever before.

The CFMA has sparked these positive developments without compromising the
public interest, including the vital interest in preventing price manipulation. The Commission
continues to deploy a wealth of market surveillance techniques and an arsenal of enforcement
weapons in its pursuit of what Chairman Lukken has labeled the agency’s zero tolerance of price
manipulation. Clearly, the Commodity Exchange Act and the Commission’s regulatory
apparatus continue to target price manipulation as public enemy #1.

FIA agrees with this emphasis. Price manipulation should be prevented whenever
possible and never tolerated. Some have questioned how well the existing anti-manipulation
defenses work when more than one energy derivative market exists. In FIA’s view, multiple
trading facilities, like NYMEX and the Intercontinental Exchange today in energy, only enhance
the need for vigorous CFTC oversight. When trading occurs on multiple markets, it is even
more important that CFTC market surveillance have ready access to all relevant large trader
information. This principle applies whether the two (or more) related markets are DCMS,
DTEFs, EXBOTs or ECMS. None of those markets would be able to survey, or should be
expected to survey, all relevant positions on its competitor trading platform.

The Commission’s traditional role as the exclusive regulator of futures

transactions and markets actually compels this kind of comprehensive and vigilant multi-market


surveillance approach. Multiple markets combined with multiple regulators would be a recipe
for disaster. For that reason, in 1974, Congress granted the CFTC the extraordinary power of
exclusive jurisdiction to make sure that only an agency expert in futures pricing would cast its
surveillance eyes on futures trading activities. At the same time, Congress wanted futures
market participants to be answerable only to that expert agency’s judgment. The Commission
has in the past correctly made clear to its sister agencies, the states, the courts and Congress that
monitoring futures pricing is its exclusive statutory duty. It should continue to do so, not as a
matter of turf but as a means of continuing to vindicate the public policy goals exclusive
jurisdiction serves, including the avoidance of duplicative or conflicting regulation.

While some may talk of loopholes and regulatory gaps, FIA believes the record
shows that the Commodity Exchange Act’s anti-manipulation foundation in the energy area is
very strong. FIA does not believe any changes to the CEA are vital to the Commission’s ability
on a day to day basis to achieve its anti-manipulation mission. The statute works well and the
CFTC works well with it. At the same time, we recognize that the Commission will take
whatever steps it determines to be needed to update its regulatory approaches consistent with its
statutory authority.

Our final point is a familiar one and a critical one. Price manipulation is public
enemy #1 because it affects both market participants and the public at large. Price manipulation
can have a serious ripple effect in our economy and can hurt many innocent bystanders. That is
why Commission vigilance is so important.

It is also why Commission regulation benefits not just market participants, but
just as profoundly non-market participants. For that reason, FIA continues to be vehemently

opposed to funding the CFTC through a transaction tax. In our view, all taxpayers benefit from