Columnist Ed Wallace offers his rebuttal to Jeffrey C. Sprecher, the chairman and chief executive of global commodities marketplace IntercontinentalExchange (ICE), who wrote a letter challenging several of the assertions made by Wallace in a column published June 27 (BusinessWeek.com, 6/27/08).
This is written in response to the letter from Jeffrey C. Sprecher, chairman and CEO of IntercontinentalExchange:
The words a "dark and unregulated" exchange are exactly as I stated in the article: Not my words. Those are the descriptions of IntercontinentalExchange as stated frequently during the four days of testimony in front of the House Committee on Energy & Commerce's subcommittee on oversight & investigation, held from Dec. 10-14, 2007. It is the exact same terminology for ICE that was found in the U.S. Senate permanent subcommittee on investigations' report, The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put the Cop Back on the Beat. That report was released on June 27, 2006.
I specifically added the OTC to the name ICE Futures Europe, because the system in question during the House hearings and in the Senate report refers to ICE's "over the counter" computer terminals in the U.S. Mr. Sprecher is well aware of what I was referring to and, as in his letter to the Fort Worth Star-Telegram, is assuming no one other than me bothered to read the Senate report or the four days of congressional testimony.
It is interesting to note that when I wrote of ICE Futures Europe in the Fort Worth Star-Telegram, ICE chastised my reporting because of the missing "OTC" position. Additionally, he often uses the "OTC" term himself in letters. See below.
Mr. Sprecher often writes one thing on one day and tells a journalist or elected representative something else on the next. The case in point this time is that ICE only has "an approximate 15% share of West Texas Intermediate." However, in a letter to Senator Dianne Feinstein (D-Calif.), dated May 22, 2008, and furnished to me by ICE, he writes, in part, "ICE's OTC markets, which were the subject of the Farm Bill Provisions, have a 0% market share for U.S. crude oil, gasoline, heating oil, and diesel fuel." Which is it? A 0% market share for WTI or 15%? I will be glad to furnish that letter ICE sent me a few weeks back.
Of course, Mr. Sprecher is completely missing the point of the article when he suggests that there are other sides to the oil equation story. I'm putting out the side of the oil story that is never read. In the same way that this spring when the media were reporting that we would have serious gasoline shortages this summer, I wrote on BusinessWeek.com that we have a 16-year high for gasoline reserves on hand (BusinessWeek.com, 4/1/08).
There is no real shortage of oil and my references for that information were not only furnished with the story, but the links were embedded into it. My line that no one has been turned away from oil is accurate. Obviously it would be international news if there were more oil contracts than oil, as the reporting would make much of the fact buyers were being turned away.
More important, as someone who reads the Energy Information Administration's (EIA) short- and long-term oil reports on a regular basis, their conclusions are all over the map. If one doubts that, read my column where the EIA becomes the source of information on oil's improved picture (BusinessWeek.com, 4/23/08).
Now, one only has to ask one very important question: As the Commodity Futures Trading Commission (CFTC) already has the responsibility for regulating trades on the Nymex, why did we move to close the "Enron loophole" in the last farm bill? And why were there so many articles in the middle of the month about "closing the London loophole"? The London loophole refers to ICE.
Of course, in both cases the intent was to bring the trading on ICE to the forefront and establish more transparency on transactions on its exchange. Or bring it up to the same standards as Nymex.
Again, I have 1,500-2,000 pages of references on this story. In addition, I have an e-mail from Chris Cook, a former director of the London Petroleum Exchange (now ICE Futures Europe), who wrote to say, "If ICE is not actually a conspiracy to defraud the public, then it's close…." I left that line out of my article because I felt it was too inflammatory.
In the first line of his letter, Sprecher writes that I ignore certain aspects of the story, apparently often in regard to his organization. I barely mentioned ICE at all in this column. But in any case, when you read the Senate report of 2006, followed by four days of congressional testimony by numerous individuals, and on virtually every page is another discussion on IntercontinentalExchange and how trading on its exchange distorts the market, it's really tough to find the other side of the story. Because only Mr. Sprecher tells it.
Now, when he wrote to the Fort Worth Star-Telegram he put in his letter that if I had just done the most "modest of fact checking", I should have covered the Enron loophole being closed in the farm bill. But this is vintage Sprecher, as the farm bill had not been passed at the time of the publication of those articles. Nor did anyone know at the time that the provision to close the Enron loophole would be inserted into it.
If, as Mr. Sprecher states, ICE is fully regulated and transparent, one wonders why he also admits that on both May 29 and June 17, the CFTC announced further oversight of its exchange. The CFTC was ordered to do so by Congress. Obviously, if ICE's reporting was as robust and transparent as he claims, no further oversight or regulations would be needed.
Additionally, I only had to make one correction to that two-part series, correcting Professor Michael Greenberger's title when he worked for the CFTC.
If you would like to read those columns, they can be found at:
I've spent hours on the phone with ICE as a result of my Star-Telegram articles, read all of the things the company sent me to read, and kept all of its e-mails to me. If ICE is not a "dark and unregulated exchange", which it is according to Congress, it is obvious from the company's letters it would like to remain one.
Thanks, Ed Wallace
Click here to see Mr. Sprecher's criticism.