The 2010 law requires the agency to draft regulations requiring swap dealers to register with the agency and adhere to various oversight requirements. The CFTC has defined a dealer as any party annually involved in transactions involving more than $8 billion.
That threshold would not capture enough of the energy market, the lawmakers argue.
“We are concerned that CFTC is failing to bring energy swap dealers under its oversight, which limits CFTC’s ability to monitor for manipulation, excessive speculation, and systemic risk in energy markets,” they wrote.
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The lawmakers pointed to the 2000-2001 electricity shortage across the West, which cost consumers an estimated $45 billion in increased energy bills, as well as lost business due to blackouts. Market manipulation was blamed for contributing to the fiasco.
“During the Western Energy Crisis, our nation learned that energy markets that lack real-time market oversight and effective regulation allow traders to rob from American citizens, disrupt economic activity, and darken cities,” the senators wrote.
They asked Gensler to examine how many energy swaps dealers have registered with the CFTC and how many claim they are exempt.
They requested a study to determine what portion of the energy market is made up of swaps dealers as defined by the proposed $8 billion threshold and how that number would change if it were lowered to $3 billion.
Further, they called upon the CFTC to analyze the extent to which dealers’ failure to register allows for market manipulation and excessive speculation.
“If these assessments show that CFTC’s definition of ‘swap dealer’ exempts a statistically significant portion of energy swaps traders or energy swaps trading from oversight, we ask CFTC to modify its interpretation of the Dodd-Frank Act’s ‘swap dealer’ definition in order to ensure that the vast majority of energy swaps trading is under the oversight of the Commission,” the group wrote.
This story was updated at 5:34 p.m. to correct the amount of transactions triggering trader registration with the CFTC.