From the report:

The CFTC defines a “large trader” for reporting purposes in the natural gas market as a trader who holds at least 200 contracts; NYMEX examines a trader’s position if it exceeds 12,000 natural gas contracts in any one month.
Amaranth held as many as 100,000 natural gas contracts in a single month, representing 1 trillion cubic feet of natural gas, or 5% of the natural gas used in the entire United States in a year. At times Amaranth controlled 40% of all of the outstanding contracts on NYMEX for natural gas in the winter season (October 2006 through March 2007), including as much as 75% of the outstanding contracts to deliver natural gas in November 2006.

Key points:
A. Findings
1. A single hedge fund, Amaranth Advisors LLC, dominated the U.S. natural gas
market in 2006.
(Worrying thought - Amaranth found a neglected source of alpha and went straight into it, full force. Isn't that what hedge funds are supposed to do? I wonder how many other markets are currently being driven by a single large hedge fund trader?)

2. In August 2006, Amaranth traded natural gas contracts on ICE rather than on NYMEX so that it could trade without any restrictions on the size of its positions.

3. Amaranth’s actions in causing significant price movements in the natural gas market demonstrate that excessive speculation distorts prices, increases volatility,and increases costs and risks for natural gas consumers, such as utilities, who ultimately pass on inflated costs to their customers.
(That rather goes against the dogma that more liquidity is good in a market, and the observation that higher trading volume in derivatives markets has smoothed out volatility in the underlyings. Obviously things are different when all the liquidity is coming from a single player.)
...

5. Current restraints on speculative trading to prevent manipulation and price distortions are inadequate.
(The reference is to Amaranth's belief that it was the victim of market manipulation in August last year - see page 114 of the report. I wonder how much more we're going to hear about this?)

6. The CFTC is unable to meet its statutory mandate to prevent market manipulation and excessive speculation from causing sudden, unreasonable, or unwarranted energy prices.

B. Recommendations

1. Congress should eliminate the “Enron Loophole” that exempts electronic energy exchanges from regulatory oversight.
(Seems like an obvious one - but ICE will scream about it; as the report notes, ICE has achieved impressive volumes by being less regulated than NYMEX)

2. If given additional legal authority, the CFTC should monitor aggregate positions on NYMEX and ICE. The CFTC and exchanges should strengthen their monitoring and oversight to prevent excessive speculation for all of the months in which contracts are traded, not just for contracts near expiration.

3. Congress should increase the CFTC budget and authorize CFTC user fees to help pay for the additional cost. (Big smiles from Walter Lukken, who incidentally became CFTC interim chairman today).

(via Economonitor)