CFTC Holds Roundtable to Consider Proposed Regulation AT

By Gregory Mocek, Paul Pantano, Neal Kumar, Michael Selig, and Mary Treanor

On June 10, 2016, Staff for the Commodity Futures Trading Commission (“CFTC”) held a public roundtable to discuss its proposed Regulation Automated Trading (“Regulation AT”).  The CFTC proposed Regulation AT in an attempt to reduce the risk of market disruptions caused by automated trading.  Proposed Regulation AT includes risk controls and transparency measures for futures commission merchants (“FCMs”), designated contract markets (“DCMs”), and CFTC registrants using algorithmic trading systems.  The proposed rule also includes a new registration requirement for persons engaged in proprietary algorithmic trading on a DCM through direct electronic access (“DEA”).  Panelists at the roundtable – including representatives of FCMs, DCMs, and market participants with DEA – expressed concerns about the broad and prescriptive scope of Regulation AT and advocated a more flexible, principles-based, approach.  read more

Posted in CFTC, Commodity Trading, Enforcement and Investigations, Mining/Metals, Oil & Gas, Power, Regulation

Traders and Compliance Professionals Take Note: Phase One of New BIS “Global Code” Establishes “Best Practices” in the Foreign Exchange Markets

By Anthony Mansfield, Gregory Mocek, Jonathan Flynn, and Jorge Pesok

On May 26, 2016, the Foreign Exchange Working Group (“FXWG”) of the Bank for International Settlements (“BIS”) published the first phase of a new “Global Code of Conduct for the Foreign Exchange Market” (“Global Code”).  According to Guy Debelle, Assistant Governor (Financial Markets) at the Reserve Bank of Australia and head of the FXWG, the purpose of the Global Code is to set out “global principles of good practice in the foreign exchange market to provide a common set of guidance to the market, including in areas where there is a degree of uncertainty about what sort of practices are acceptable, and what are not.”  As such, the Global Code will likely be used by global regulators to define “best practices” in the FX markets, and the behavior that would be deemed disruptive, abusive, or manipulative.  read more

Posted in Commodity Trading, Regulation

CFTC Unanimously Approves Supplemental Proposal on Position Limits

By Anthony Mansfield, Paul Pantano, Jonathan Flynn, Neal Kumar and Michael Selig

On May 26, 2016, the Commodity Futures Trading Commission (“CFTC”) unanimously approved a proposed supplement (“Supplemental Proposal”) to its December 2013 proposal to establish position limits on futures and economically equivalent swaps.  The primary focus of the Supplemental Proposal is the definition of bona fide hedging positions exempt from speculative position limits.  read more

Posted in CFTC, Commodity Trading, Enforcement and Investigations, Oil & Gas, Power, Regulation

CFTC Proposes Amendment to RTO-ISO Order

By Athena Eastwood, Mark Haskell, Anthony Mansfield, Gregory Mocek, Paul Pantano, Brett Snyder, Jonathan Flynn, Christopher Hood, Neal Kumar, Thomas Millar, and Michael Selig

On May 10, 2016, the Commodity Futures Trading Commission (“CFTC”) proposed an amendment (“Proposed Amendment”) to an order it issued on March 28, 2013 (“RTO-ISO Order”), exempting certain electric energy transactions from a number of provisions of the Commodity Exchange Act (“CEA”) and CFTC regulations other than the general anti-fraud and anti-manipulation provisions, and other scienter-based prohibitions.  If adopted, the Proposed Amendment would clarify that private rights of action under Section 22 of the CEA are not exempt under the RTO-ISO Order.  Accordingly, plaintiffs would be permitted to pursue CEA-based allegations of fraud and market manipulation in connection with wholesale electricity market transactions that are primarily regulated by the Federal Energy Regulatory Commission (“FERC”) and the Electric Reliability Council of Texas (“ERCOT”) even though the Federal Power Act bars private actions.  read more

Posted in CFTC, Commodity Trading, Enforcement and Investigations, FERC, Mining/Metals, Oil & Gas, Power, Regulation

Compliance Departments Must Continue to Evolve as Regulators Refine Their Approach to Spoofing

By Anthony Mansfield, Gregory Mocek, Paul Pantano and Jonathan Flynn

The government’s pursuit of alleged “spoofing” continues to garner headlines with the criminal authorities recently securing a conviction in the prosecution of Michael Coscia for alleged spoofing on the Chicago Mercantile Exchange as well as an order requiring the extradition of a UK resident, Navinder Sarao, to face a combination of criminal and civil charges in the United States for alleged spoofing in the S&P 500 E-mini futures contract.  read more

Posted in CFTC, Commodity Trading, DOJ, Enforcement and Investigations, Regulation

Long-Awaited Decision is a Mixed Result for Litigants Battling FERC Enforcement Actions in Federal Court

By Paul PantanoThomas Millar and Mary Treanor

Individuals and organizations litigating the imposition of civil penalties by the Federal Energy Regulatory Commission (“FERC” or “Commission”) under its anti-manipulation authority in federal court received another opinion last week, this time from the Federal District Court for the District of Massachusetts, in what are commonly known as the “Paper Mill” cases. On April 11, 2016, the court denied motions to dismiss and for judgment on the pleadings filed as early as December 19, 2013 by Lincoln Paper and Tissue, LLC (“Lincoln”), Competitive Energy Services, LLC (“CES”), and Richard Silkman (together, “Defendants”). The decision is significant because it follows Judge Nunley’s decision in FERC v. Barclays Bank PLC et al., in the Eastern District of California as only the second time that a federal court has ruled on dispositive motions challenging FERC’s jurisdiction and the adequacy of its allegations in a civil penalty enforcement action under the Federal Power Act (“FPA”).  read more

Posted in Cases, Commodity Trading, FERC, Oil & Gas, Power, Regulation

CFTC Awards More than $10 Million to Whistleblower

On April 4, 2016, the Commodity Futures Trading Commission (“CFTC”) announced a whistleblower award of more than $10 million.  This is only the third whistleblower award that the CFTC has approved since the inception of the CFTC whistleblower program in 2011, and by far, the largest award amount.  Although the CFTC Whistleblower Rules are not new, this award is a reminder that there are now potentially powerful incentives for people to report internal wrongdoing.  read more

Posted in Cases, CFTC, Commodity Trading, Enforcement and Investigations, Mining/Metals, Oil & Gas, Power, Regulation

CFTC Adopts Final Trade Option Rule

On March 16, 2016, the Commodity Futures Trading Commission (“CFTC”) unanimously approved amendments to the rules applicable to certain physically-settled options referred to as “trade options.”  This final rule substantially reduces the regulatory burdens for end-users entering into trade options by eliminating reporting and recordkeeping requirements.  The CFTC also confirmed that it does not intend to impose position limits on trade options.  The final rule becomes effective upon publication in the Federal Register, which we expect to occur later this week or early next week.  read more

Posted in CFTC, Commodity Trading, Mining/Metals, Oil & Gas, Power, Regulation

New ICE Futures U.S. Wash Trade FAQ

Effective February 23, 2016, ICE Futures U.S., Inc. (“ICE” or “Exchange”) issued a revised Wash Trade Frequently Asked Questions (“ICE FAQ”).  This ICE FAQ replaces a 2009 ICE Wash Trade FAQ and provides additional guidance to market participants on trades that may constitute wash trades.  The ICE FAQ also highlights intermediary and third party obligations not to accept orders for trades if it knows or should know that they are wash trades.

The scope of the wash trade prohibition applies to any “market participant” which the FAQ defines as “any person initiating or executing a transaction directly or through an intermediary, and any person for whose benefit such a transaction has been initiated or executed.  A market participant also includes any individual or firm that is involved with the placement, negotiation, or execution of a transaction such as a floor, firm or voice broker.”  read more

Posted in Commodity Trading, ICE, Mining/Metals, Oil & Gas, Power, Regulation

CFTC Energy and Environmental Markets Advisory Committee Meeting

On February 25, 2016, the Commodity Futures Trading Commission’s (“CFTC”) Energy and Environmental Markets Advisory Committee (“EEMAC”) convened its first public meeting of the year.  During the first of two panel discussions, the EEMAC considered the CFTC’s proposed order granting exemptive relief for certain transactions offered or sold in markets administered by the Southwest Power Pool (“SPP”) from provisions of the Commodity Exchange Act (“CEA”) and CFTC regulations.  During the second panel, the EEMAC discussed CFTC Staff’s “Preliminary Report on the Swap Dealer De MinimisException.” The meeting concluded with a presentation of the EEMAC’s “Report on EEMAC’s 2015 Review and Consideration of the CFTC’s Proposed Rule on Position Limits.”  read more

Posted in CFTC, Regulation