The top Democrat on US House Natural Resources Committee wants regulators to look at the role high frequency trading may have had on Monday's late-day selloff in the petroleum futures complex.
"Wall Street computers could be manipulating the oil markets, and consumers on Main Street are paying the price," wrote Representative Edward Markey, a Massachusetts Democrat, in a letter sent Wednesday to US Commodity Futures Trading Commission Chairman Gary Gensler
On Monday, October crude tumbled from $97.85/barrel at 1:54 p.m. EDT to $94.83/b, which Markey said may have been similar to the 2010 flash crash in equity markets. Monday's drop could cause investors and the public to lose confidence in commodities markets and could mark "a precursor to increased volatility in the future," Markey wrote.
"An uptick in volatility would make it more difficult for producers, manufacturers, and users to effectively hedge their positions, thereby undermining the fundamental reason that commodities markets like NYMEX exist," Markey wrote.
The CFTC is investigating Monday's drop, according to CFTC Commissioner Bart Chilton, a frequent critic of high-frequency trading. Chris Grams, a spokesman for NYMEX parent CME Group, said "markets performed as designed" on Monday.
In his letter, Markey said he wants the CFTC to look at the use of high-frequency trading computers in US energy commodities markets and the impact they may be having on these markets. In addition, Markey said the agency should consider new rules which may be needed to "limit or restrain" high frequency energy trading.
