Washington DC, USA: Issuing a warning that the commodities markets were ''ripe'' for manipulation the Commodities Futures Trading Commission (CFTC) acting chairman, Walter Lukken, told a US Senate panel Monday that it was imperative that strong enforcement actions be taken in order to prevent illegal manipulation.

The CFTC chairman was careful not to state whether or not there was speculation taking place in the markets, only that there was a distinct possibility for such a manipulation. Testifying before the House Committee on Energy and Commerce, Subcommittee on Oversight and Investigations, he informed lawmakers about the recent initiatives taken by the commission to effectively regulate the markets.

Lukken complained that staffing shortages had already made a difficult job even more challenging. "Approximately $5 trillion of notional transactions flow through these US exchanges and clearing houses daily," he said.

"This description alone would make the oversight of these markets a challenge for regulators," Lukken added. "But add to it the sub-prime crisis, record energy and agricultural commodity prices, the influx of financial funds in futures, and historic low staffing levels at the CFTC, and it is clear that these are challenging times for this agency."

"The proper oversight of markets requires transparency," Lukken said. In this regard he pointed out the efforts made by the CFTC to gather information regarding trades.

Last week, the CFTC and its British counterpart, the British Financial Services Authority reached an agreement with ICE Futures markets. In a first of a kind deal, regulations will be imposed on the US benchmark West Texas Intermediate oil contracts that trade on ICE's London-based electronic exchange. (See: Speculators not responsible for spike in oil prices, says InterContinental Exchange)

"After consultation with the British (Financial Services Authority), the CFTC is announcing that ICE Futures Europe has agreed to begin the process of implementing position and accountability limits on its linked crude oil contract," Lukken said in written testimony before the Committee on Agriculture, Nutrition and Forestry and the Committee on Appropriations' financial services subcommittee last week.

The CFTC will provide a report to Congress by September 15, 2008 with recommendations for actions based on the information, Lukken said.

"During these turbulent market conditions for crude oil, the environment is ripe for those wanting to illegally manipulate the markets and, as a result, the Commission has stepped up its already aggressive enforcement presence," Lukken said.