Should the natural gas market be subjected to stricter rules. The implosion of the hedge fund Amaranth has drawn attention to a little-known loophole created by Enron when it successfully lobbied the US government to deregulate trading by energy exchanges. And the problem will get worse with carbon shaping up as the world's biggest commodity market.
The implosion of hedge fund Amaranth has raised calls for more regulation but is that a case of shooting the messenger? The real culprits might be the banks. With hedge funds now the biggest clients of banks, changes in banking structure have opened the way for real conflicts of interest.
The wrong-way bets which cost Connecticut-based hedge fund Amaranth Advisors more than $6 billion are not a one-off. These funds have systems designed to make traders take dangerous risks. There will be many more Amaranths. And the risks are spread to non-investors who have their money sitting in pension funds that are drawn to hedge funds like moths to a flame.
