Aug. 20 (Bloomberg) -- The U.S. Commodities Futures Trading Commission and the U.K. Financial Services Authority said they are boosting cooperation in their supervision of energy markets in an effort to limit speculation and manipulation.

The CFTC will be able to inspect IntercontinentalExchange Inc.’s London market and the FSA can gather information at the New York Mercantile Exchange, according to the terms of the arrangement, which covers U.S.-linked energy futures contracts. The two agencies will also coordinate any “emergency action.”

“We must effectively utilize all existing powers to ensure that futures markets remain free of manipulation, fraud or other market abuses,” said CFTC Chairman Gary Gensler in a statement. “Achieving this goal requires a coordinated international response.”

Linked contracts traded on ICE Futures Europe will be subject to new restrictions, the CFTC said today in a separate statement, a first sign of how the strengthened cooperation with the FSA may work.

“It helps put ICE on a comparable footing with Nymex,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York.

ICE Europe

ICE Futures Europe must within 120 days provide the commission with trade execution data on all of its linked contracts, advance copies of all rules and amendments, and copies of all disciplinary notices. ICE Futures Europe offers contracts linked to Nymex crude, gasoline and heating oil.

Trans-Atlantic differences in commodity-trading regulations were highlighted by U.S. and U.K. lawmakers over the past year. A former CFTC official said last year that the FSA’s lack of restrictions led to excessive speculation.

FSA Chairman Adair Turner told a parliamentary committee in July 2008 that supply and demand, not speculation, was responsible for then-record oil prices, contradicting some members of the U.S. Congress who have pushed for greater market oversight.

The commission has moved to limit commodity speculation amid concerns that speculators are distorting commodity prices.

Last year, the CFTC required ICE Futures Europe to impose U.S.-style limits on its Nymex-linked crude contract, constricting the so-called London loophole that allowed U.S. traders to buy oil contracts on ICE and evade rules designed to keep one trader from gaining too much control of the market.

Trading Limits

ICE Futures Europe now limits traders to 10,000 net futures in the spot month, 20,000 in all months, and 3,000 in the last three days before the contract expires.

Increased cooperation between regulators around the world has been sought in the wake of the worst financial crisis since the Great Depression. It was among the pledges by global lawmakers when they met in London in April at the Group of 20 Nations’ summit.

“They want to send a message to the market of enhanced cooperation,” said Jonathan Herbst, a regulatory lawyer at London based Norton Rose LLP and a former FSA official.

The accord follows a meeting at the FSA with hedge-fund mangers, oil companies and traders earlier this month about whether U.K. regulation is transparent enough. Across the Atlantic, the CFTC and the Securities and Exchange Commission today said they would discuss harmonizing regulatory policies.

“It is important that we continue to pursue all means to maintain fair, orderly and efficient markets, both nationally and internationally,” the FSA’s Turner said in a statement.

Crude Gains

Crude oil has risen 63 percent this year. The contract for September delivery, which expired today, rose 12 cents, or 0.2 percent, to close at $72.54 a barrel on Nymex. The more active October contract fell 92 cents, or 1.3 percent, to $72.91.

The enhanced cooperation with the FSA and oversight of ICE Futures Europe is the latest in the CFTC’s efforts to control commodity speculation.

The commission’s new conditions on ICE Futures Europe were imposed in a revised “no-action” letter that outlines how ICE Futures Europe contracts are regulated by the CFTC.

“ICE Futures Europe has a 30-year track record as a regulated futures exchange performing rigorous surveillance, regulatory and compliance functions,” said David Peniket, president of ICE Futures Europe in a statement. “We will continue to work with the FSA and CFTC to ensure full compliance.”

Gresham Investment

Yesterday, the commission said that Gresham Investment Management LLC, a private investment firm in New York City, will no longer be exempt from limits on the number of soybean, corn and wheat contracts. Two Deutsche Bank AG PowerShares commodity funds, worth a total of $5.8 billion, will no longer be exempt from limits on the number of corn and wheat contracts.

The move restricts the agricultural holdings of PowerShares DB Commodity Index Tracking Fund, the largest broad-based commodity index fund in the U.S., and PowerShares DB Agriculture Fund, the largest agricultural exchange-traded fund. Both track Deutsche Bank indexes.

In July, the commission imposed limits on a natural gas contract on the ICE’s over-the-counter market based in Atlanta. The limits forced the U.S. Natural Gas Fund to reduce its ICE holdings and hold off on issuing new shares. The commission held hearings in July and August on further restrictions of energy speculation.

The commission announced July 30 that the ICE Futures Europe trader data would be incorporated into its Commitment of Traders Report.

To contact the reporters on this story: Caroline Binham in London at cbinham@bloomberg.net; Asjylyn Loder in New York aloder@bloomberg.net.

Last Updated: August 20, 2009 16:28 EDT