It is possible that Amaranth Advisors could have avoided the $6 billion blow-up had it gone beyond the call of duty after contact from the New York Mercantile Exchange. Bloomberg News reports, citing people familiar with the matter, that a month before disaster struck, the Nymex warned the hedge fund manager to reduce the number of some of its natural-gas trades, but not to spare the firm from what was about to occur. Rather, according to Bloomberg News, Nymex “routinely conducts market surveillance,” says exchange spokeswoman Anu Ahluwalia, to make sure adherence to its “accountability levels,” which is what the exchange was doing when it called on Amaranth. The purpose of those position limits, says Bloomberg News, is to prevent a single entity from grabbing too much control of the market, but the rules apply only to futures requiring actual delivery of the commodity, instead of a cash settlement. Amaranth did cut its holdings, but obviously only enough to satisfy Nymex and not enough to stem the huge losses. Meanwhile, Brian Hunter, the purported mastermind behind the heavy natural-gas bets, reportedly is no longer coming in to Amaranth’s offices, though he hasn’t been told he’s been terminated, according to The Wall Street Journal.
