John Hyland, chief investment officer of the $2.3 billion US Oil Fund and $4.5 billion US Natural Gas Fund, will be among those who will testify Wednesday at a Commodity Futures Trading Commission hearing. Hyland will be participating in the third in a series of such hearings aimed at addressing the current supplication of position limits and exemptions from position limits in energy markets. The hearing will seek comment on the application of position limits across all markets and participants, the effects of limits on market function and risk management, whether the CFTC needs additional authority to implement such limits, how limits will be determined and what qualifying factors would grant exemption from position limits.

Commissioner Jill Somers noted the issues that will face ETFs in particular at the hearing.

"Trading linked to commodity indexes, exchange traded funds and exchange traded notes presents a different set of questions. Should positions related to such trading be governed by their own set of rules given the passive nature of the activity? How do we determine the appropriate level of passive investment in the markets—should it be based on percentages, numerical limits, or some other methodology?," Sommers speculated in a July 28th written statement.

Hyland told the WSJ Monday that he is not convinced that the two US Commodity ETFs are moving commodity prices, and that the hearing "will hopefully put this nonsense to rest."

Nicholas Gerger, the CEO of US Commodity Funds, noted in a letter to the CFTC that the funds' use of futures contracts resulted in "little or no price disruption even as the overall size of the funds' positions have increased dramatically." However, the WSJ also notes that analysts at Raymond James in Houston stated in a recent note that the US Natural Gas fund has ballooned "well beyond its critical mass" to become "a bigger market influence than planned."

Other panelists at the Wednesday hearing include representatives from Industrial Energy Consumers of America, American Trucking Association, Chesapeake Energy and the Futures Industry Association.  

Edited by: Meredith Mazzilli


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