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'Outrage' after CFTC position data leak

Friday 26 August 2011 - by Will Henley

The US Commodity Futures Trading Commission has come under fire after sensitive information on companies' derivatives market positions was leaked to the media.

The Futures Industry Association wrote to the regulator on Thursday to warn the incident could affect the willingness of foreign regulators and market players to send it confidential data in the future.

FIA president John Damgard called on CFTC chairman Gary Gensler to order a thorough investigation to ensure that no laws were broken, after a list of position information was apparently passed to Congress, and then given to the press.

Damgard, in his letter sent this Thursday and seen by Global Financial Strategy, said his members were "shocked and outraged" after the supposedly secret trove was referenced in the Wall Street Journal on 18 August.

"In our view, this unfortunate incident poses a serious threat to the confidence of market participants in the CFTC's ability to protect proprietary information [and] raises troubling questions about the role of Congress in handling such information.

"[It also] jeopardises the CFTC's future ability to obtain cooperation in data collection and market surveillance and undermines the agency's ability to work cooperatively with its counterparts in overseas jurisdictions," Damgard wrote.

The article in the WSJ cited a list compiled by the CFTC which showed major firms had placed large bets on oil prices just before crude prices reached all-time highs in 2008.

The newspaper suggested that the list, which is believed to have been passed to the House Energy Committee before the WSJ, could provoke fresh calls for a crackdown on oil price speculators.

Under the Dodd Frank Act, the CFTC is given much greater responsibility to collect proprietary data on customer positions. However market players are concerned about the handling of such commercially sensitive data.

Damgard said it is essential that the regulator take immediate action to find out whether any laws or regulations were transgressed by the leaking of the information.

He also called on the Inspector General to assist and the CFTC ensure that, even if no laws were broken, that it "never happens again".

A spokesman for the CFTC did not return a request for comment.

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