US CFTC probes pre-EIA storage report trading activity
Washington (Platts)--19Feb2013/317 pm EST/2017 GMT
The US Commodity Futures Trading Commission is examining NYMEX natural
gas futures trades executed on February 7 beyond the scope of its usual
market surveillance, and CFTC commissioners have been briefed on the
situation, according to an agency source, who spoke on condition of anonymity.
The probe comes after the CFTC was reported to have intensified its
surveillance of trading ahead of the Energy Information Administration's
weekly natural gas storage report, which is usually published on Thursdays at
10:30 a.m. ET.
While there is no indication that the CFTC has initiated an official
investigation, the commission is examining the activity of specific firms,
according to an unnamed source the Wall Street Journal cited on Saturday.
A spokesman for the CFTC said in an email Tuesday that "this is all a
part of routine surveillance conducted by our staff."
On February 7, EIA reported a storage draw of 118 Bcf, which was smaller
than analysts expected. Analysts polled by Platts anticipated a withdrawal of
The NYMEX March contract settled 13.3 cents lower on February 7, closing
On February 7, in the minute before the EIA release, 1,954 NYMEX gas
contracts traded, compared with the 111 contracts that traded in the prior 60
seconds, according to NYMEX data.
Gene McGillian, a trader at TFS Energy Futures, said that while there
were some concerns around unusual activity in natural gas products recently,
it is more likely that in this instance the CFTC is trying to reiterate to
the market that it is keeping an eye on trading activity during and before
important data releases.
This was the second instance this year that trading just before the
important weekly data report for natural gas storage has come under scrutiny.
Nanex, a Chicago-based trading technology firm reported in January that,
"on January 31, 2013, approximately 400 milliseconds before the official
(10:30 a.m. EST) release of the EIA Natural Gas Report, trading activity
exploded in natural gas futures and ETFs such as UGZ, UNG and BOIL."
Nanex said it was likely a group of traders received the information
"earlier than others by milliseconds."
Eric Hunsader, CEO at Nanex, said that such a burst of action usually
"happens at 10:30, but [January 31] was unusual because a significant amount
-- 300 contracts -- was sold 400 milliseconds before the report," Hunsader
said. On a regular trading day prior to the report the volume has hardly ever
exceeded that amount."
Nanex also noted trading activity started in the UNG exchange-traded fund
about nine seconds before the official release on February 7.
Hunsader was not immediately available for comment Tuesday.
Many in the industry have attributed this activity, which can appear to
be unusual to market veterans, to the rise of high-frequency trading
platforms, which the CFTC has focused its attention on in the past.
--Christopher Tremulis, firstname.lastname@example.org
--Edited by Keiron Greenhalgh, email@example.com