COMMENTS: London, the new Cayman Islands

How much is the high cost of crude oil caused by commodity speculators on global financial markets? Senate hearings into the Inter Continental Exchange, an all-electronic trading floor that accounts for 48% of oil futures contracts, caught the eye of Armen Keteyian for CBS' Investigation. Keteyian worried that speculators are using ICE to manipulate the cost of crude either by "excessive buying designed to drive up the price or phony transactions that imply a supply problem that does not exist." He ticked off a list of major players who trade using ICE: banks such as Citi, JP Morgan, Bank of America; Wall Street firms such as Goldman Sachs, Merrill Lynch, Barclays Capital, Morgan Stanley; Big Oil conglomerates such as ExxonMobil, bp, Royal Dutch Shell.

ICE was founded by Wall Street brokerage houses Goldman Sachs and Morgan Stanley; it is based in Atlanta; its computers are located in Chicago; its transactions are conducted in US dollars. Yet it avoids federal regulation by the Commodities Futures Trading Commission because it is "considered a foreign exchange." ICE told CFTC that it is based in London. Explained Keteyian: "British financial authorities are notoriously lax."


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