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NEW YORK -- The New York Mercantile Exchange is supporting an Increase regulation of the metals trading industry.

The effort is focused on an amendment, recently introduced in U.S. Senate, that would reverse a component of the landmark Commodity Futures Modernization Act of 2005.

Sponsored by Sen. Dianne Feinstein, (D., Calif.), the amendment is an. attempt to repeal the provision that exempts or excludes over-the-counter (OTC) derivatives, including energy and metals, from regulation by the Commodity Futures Trading Commission (CFTC).

The Feinstein amendment blames OTC commodity derivatives for contributing to the Enron Corp. collapse and the California energy crisis and should be regulated accordingly.

"This amendment ensures that electronic exchanges that trade energy derivatives be subject to the same requirements as other exchanges, like the Chicago Mercantile Exchange, the New York Mercantile Exchange and the Chicago Board of Trade," Feinstein said.

She added that those who trade energy derivatives "off an exchange" would be required to keep a record of the transactions. "That way, if there is a complaint, the federal regulators would have a record to review," she added.

A Nymex spokeswoman confirmed the exchange's support of the bill, saying that the primary reason for their involvement is to get more regularity in the markets.

"Its about equal treatment of futures markets in metals and energy. Electronic versus open outcry is not a factor,' she said.

The spokeswoman said Nymex had fought the original provision of the Commodity Futures Modernization Act, which exempted OTC dealing from regulation, and will continue to stand by its objection.

Stacy Carey of the International Swaps and Derivatives Association (ISDA) said Feinstein's reasoning to keep metals derivatives, which fall under the "exempt" commodities category with energy, in the amendment is not clear.

"She does not address financial commodities in the amendment, so why does she refuse to exclude metals?" Carey said.

In a letter sent to Sens. Tom Daschle (D., S.D.) and Trent Lott (R., Miss.), ISDA urged the Senate to vote against the Feinstein amendment because insufficient evidence was available to conclude that OTC derivatives contributed to those events.

"The amendment apparently Would also apply to OTC derivatives based on products such as metals which have no connection either to the Enron collapse or to the California energy crisis," the letter read.

Carey's said her only understanding of Feinstein's reason to include metals in the amendment is "no other reason than an anti-competitive nature."

The ISDA sees the amendment as imposing burdens on the parties involved as well, as dealers and the trading facilities they use. A spokesman for Feinstein said metals derivatives pose a similar threat as those in energy and although he said-metals did not lead to the Enron collapse, he affirmed the risk.

"We discussed this with a number of entities, and given the history of effort in the past to corner the metals market, such as silver, we think it should be closed along with energy," he said.

On Wednesday the Senate temporarily set aside the amendment as part of its consideration of a broad energy bill. A spokesman said Feinstein was happy with the decision as she prepared to bring the amendment to a vote along with Sen. Phil Gramm (R., Texas).

Randall Dodd, director of the Derivations Study Center in Washington, said there is very little information available involving OTC derivatives, leaving the government and other market participants in the dark on possible market pressures or failures.

"The is very little information provided by either the market participants or collected by government regulators," he said in a report. He added that another danger in the use of derivatives is to evade financial market regulations designed to improve economic stability.

The size of the derivatives market, including financial derivatives, is estimated by the Bank of International Settlements, Basel, Switzerland, to exceed $190 trillion--more than eight times the U.S gross domestic product. Dodd said the current method of regulating these markets is not adequate to "assure that the markets are safe and sound and that disruptions from these markets do not spill over into the broader economy."

The amendment is also asking for a joint effort on the part of the Federal Energy Regulatory Commission and the CFTC to ensure that commodity markets are "transparent, regulated and working."