Back in 2006, the New York Mercantile Exchange was getting a little worried about one of the hedge funds trading its natural gas futures. Seems the firm owned as much as 70% of them at any one time, which seemed both to the NYMEX at the time and to the U.S. Senate later rather excessively speculative. So the NYMEX told the hedge fund and its lead trader to cut it out.
Said hedge fund and said lead trader apparently liked controlling enough of a commodities market to allegedly manipulate it at will, so it just moved that trading to another platform. This had a benefit beyond merely maintaining the hedge fund’s outsized role in these markets: The new platform was an electronic one run by the Intercontinental Exchange, and such platforms were then essentially entirely unregulated.
The hedge fund, of course, was Amaranth Advisors, and the trader was Brian Hunter, and months after the move to ICE Hunter’s trades made Amaranth the then-biggest hedge fund failure of all time, losing more than $6 billion in a month. Of course, that might not have happened had ICE not welcomed the trades that the NYMEX found so off-putting with such open arms, but one person was not interested in any explanations of l’affaire Hunter that placed any responsibility in the exchange’s lap.
Loeffler, serving as a spokesperson for the company, defended ICE, saying it was too soon to form any conclusions about the Amaranth implosion. “We think until there is more information, it’s not fair for anyone to guess what Amaranth may have been doing,” she said. “We believe we are only a small piece of the…market and certainly the most transparent piece.”
That would be one Kelly Loeffler, than relatively-newly married to ICE CEO Jeffrey Sprecher and at the relatively early stages of a career that would make her and her husband near-billionaires, see them buy the New York Stock Exchange, and provide the bonafides for her appointment in 2018 to the U.S. Senate, where she’d really like to stay and thinks Georgians next month should allow her to do so on account of that career.
Sen. Kelly Loeffler, the Republican vying in one of the two critical January 5 Senate run-offs in Georgia, declared that she has been using her “private sector experience to make sure that Georgians get back to work.”
And also maybe to enrich herself with the information one gets as a Senator. But let’s talk about that “private sector experience” and what it meant for Georgians.
Partly due to Amaranth’s speculative trading on the unregulated ICE exchange, purchasers of natural gas that year were hit with inflated prices. “Many of these inflated costs were passed on to consumers, including residential users who paid higher home heating bills,” the Senate report found…. The Municipal Gas Authority of Georgia calculated that 243,000 of its customers collectively had to pay an extra $18 million in the winter of 2006 and 2007 because of Amaranth’s shenanigans.
How Kelly Loeffler’s Firm Facilitated an Enron-Like Scandal [Mother Jones]