New MiFID I Consultation Paper Creates Further Challenges for Commodity Market Participants

By Assia Damianova, Doron Ezickson, Nick Shiren, Jonathan Flynn, Antoinette Maginness and Adam Topping

On 29 September 2014, ESMA published a consultation paper (the Consultation Paper) seeking industry feedback for guidelines relating to certain commodity derivatives, namely those falling under C6 and C7 of Annex I of the Markets in Financial Instruments Directive (MiFID).  One of the reasons for publication of the guidelines is to ensure consistent treatment of these contracts under the European Market Infrastructure Regulation (EMIR) which has been in force throughout the European Union (EU) since 12 August 2012.  EMIR was implemented with the objective of increasing transparency and reducing risk in the European OTC derivatives markets.  The obligations under EMIR include certain clearing, risk mitigation and reporting requirements for parties entering into OTC derivatives.  read more

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

First Criminal Prosecution for Spoofing: High Frequency Trading Firm Owner Indicted in Northern District of Illinois

By Jodi Avergun, Anthony Mansfield, Gregory Mocek, Paul Pantano, Isabelle Corbett and Jonathan Flynn

On October 2, 2014, the U.S. Attorney for the Northern District of Illinois announced the indictment of Michael Coscia, the owner of Panther Energy Trading (“Panther”), for six counts of commodities fraud and six counts of spoofing. This indictment represents the first ever criminal case to use the anti-manipulation authority provided in the Dodd-Frank Act to charge spoofing in the context of commodities transactions, and is one of the first major cases announced by the newly-formed Securities and Commodities Fraud section of the U.S. Attorney’s office for the Northern District of Illinois.   read more

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

On to the Supreme Court? The D.C. Circuit Denies FERC’s Request for Rehearing En Banc of its Decision to Vacate FERC’s Demand Response Rule

By Kenneth Irvin, Gregory Lawrence, Terence Healey and Thomas Millar

On September 17, 2014, the United States Court of Appeals for the District of Columbia Circuit denied the Federal Energy Regulatory Commission’s request for rehearing en banc of the D.C. Circuit’s decision to vacate FERC’s wholesale demand response compensation rule. The D.C. Circuit’s original decision striking down FERC’s demand response program remains in place, but the Court has not yet issued its mandate.  Rather, on September 22, 2014 FERC and other interested parties moved to stay issuance of the mandate pending the parties’ consideration whether to petition the Supreme Court for a writ of certiorariread more

Posted in FERC, Oil & Gas, Power, Regulation

Clear Rift Highlighted by Commissioners’ Lack of Action on New England’s Most Recent Forward Capacity Auction Results

By Kenneth Irvin, Gregory Lawrence, Terence Healey and Thomas Millar

On September 16, 2014, the Federal Energy Regulatory Commission’s four Commissioners issued statements explaining a 2-2 deadlock between Chairman LaFleur and Commissioner Moeller on the one hand and Commissioner Clark and new Commissioner Bay on the other, over whether to accept rates resulting from ISO New England Inc.’s (“ISO-NE”) most recent capacity auction as just and reasonable.  In addition to fueling concern that capacity resources in New England cannot necessarily rely on the results of future capacity auctions, the sharp contrast  among the Commissioners’ statements provides a glimpse of what to expect when Norman Bay takes over as Chairman on April 15, 2015. Commissioner Bay’s joint statement with Commissioner Clark also does little to alleviate concerns raised by some during his confirmation proceedings that Bay’s past experience as head of FERC’s Office of Enforcement will be featured prominently during his tenure as Chairman.  read more

Posted in FERC, Oil & Gas, Power, Regulation

Update to New CME Rule on Disruptive Trading Practices Summary Chart

By Anthony Mansfield, Paul Pantano, Sohair Aguirre and Neal Kumar

On August 28, 2014, the Chicago Mercantile Exchange Inc., the Board of Trade of the City of Chicago, the New York Mercantile Exchange, Inc., and the Commodity Exchange, Inc. (collectively, the “CME”) submitted a notice of a rule adoption to the Commodity Futures Trading Commission (the “CFTC”) regarding new Rule 575, titled “Disruptive Practices Prohibited.”  Rule 575 became effective September 15, 2014.  The CME also issued Market Regulation Advisory Notice RA1405-5 (“CME MRAN”) which, with new Rule 575, provides regulatory guidance on various types of prohibited disruptive order entry and trading practices.  On September 11, 2014, the Futures Industry Association (“FIA”) hosted a webinar with staff from the CME to discuss new Rule 575 and the CME MRAN.  This Clients & Friends Memo updates our previous memo on this topic based on FIA’s webinar.  In addition, on September 15, 2014, CME issued an updated MRAN with “minor modifications” based on CME’s discussions with the CFTC.  The updated MRAN did not change the September 15, 2014 effective date.  read more

Posted in CFTC, Commodity Trading, Oil & Gas, Regulation

New CME Rule on Disruptive Trading Practices Summary Chart

By Anthony Mansfield, Paul Pantano, Sohair Aguirre and Neal Kumar

On August 28, 2014, the Chicago Mercantile Exchange Inc., the Board of Trade of the City of Chicago, the New York Mercantile Exchange, Inc., and the Commodity Exchange, Inc. (collectively, the “CME”) submitted a notice of a rule adoption to the Commodity Futures Trading Commission (the “CFTC”) regarding new Rule 575, titled “Disruptive Practices Prohibited,” that will become effective September 15, 2014.  The CME also issued Market Regulation Advisory Notice RA1405-5 (“CME MRAN”) which, with new Rule 575, provides regulatory guidance on various types of prohibited disruptive order entry and trading practices.  The prohibited disruptive trading practices specified in new Rule 575 will supplement existing CME exchange rules including Rules 432.B.2, 432.Q, and 432.T.  read more

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

Summary of Prudential Regulators’ Re-Proposed Margin Rules

By Steven Lofchie, Jeffrey Robins and Nihal Patel

On September 3, the Board of Governors of the Federal Reserve System (“Board”), the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Farm Credit Administration and the Federal Housing Finance Agency (collectively, the “Prudential Regulators”) voted to re-propose rules to implement Sections 731 and 764 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) (a draft of which has been published online – the “Draft Proposal”). The Draft Proposal would impose initial and variation margin requirements on prudentially regulated swap dealers, security-based swap dealers, major swap participants and major security-based swap participants (“Covered Swap Entities”) entering into uncleared swaps and security-based swaps.  read more

Posted in CFTC, Commodity Trading, Dodd-Frank, Enforcement and Investigations, Regulation

REMIT Draft Implementing Acts Further Define Data Reporting Obligations

By Doron Ezickson and Adam Topping

On 8 July 2014, the European Commission’s DG Energy published an updated draft of the implementing acts on data reporting under the Regulation on Wholesale Energy Market Integrity and Transparency (“REMIT”). This document sets out the requirements for the reporting of wholesale energy products and fundamental data in the EU as part of the REMIT implementing acts. This draft will come into effect when it is published in its final version in the EU’s Official Journal, which is expected to occur in Autumn 2014.  read more

Posted in Commodity Trading, Oil & Gas, Power, Regulation, REMIT

Recent UK Proposals Emphasise Importance of REMIT Compliance for Energy Firms

By Doron Ezickson and Adam Topping

Two recent actions demonstrate the United Kingdom’s (“UK”) continuing commitment to enforcing the European energy laws and the need for vigorous compliance efforts by market participants. Last month, the Office of Gas and Electricity Markets (“Ofgem”) published an open letter raising concerns as to market participants’ compliance with the required disclosure of inside information under the Regulation on Wholesale Energy Market Integrity and Transparency (“REMIT”).  Following on from this statement of concern, the UK Department of Energy and Climate Change (“DECC”) opened a public consultation on strengthening REMIT enforcement in the UK through use of criminal sanctions for key offences.  read more

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

Gloves Are Off: FERC Issues Public Notice of Alleged Violations in Powhatan Investigation

By Gregory Lawrence, Terence Healey and Christopher Polito

On August 5, 2014, the Federal Energy Regulatory Commission (“FERC”) issued a public Staff Notice of Alleged Violations (“NAV”) regarding alleged manipulative Up To Congestion trading by Powhatan Energy Fund (Powhatan) in the PJM energy market.  The NAV states that FERC’s Office of Enforcement (“OE”) “has preliminarily determined that Houlian (Alan) Chen, HEEP Fund Inc., and CU Fund Inc., and Powhatan Energy Fund, LLC, violated the Commission’s Anti-Manipulation Rule, 18 C.F.R. § 1c.2 (2014) by engaging in manipulative Up To Congestion trading in the PJM Regional Transmission Organization between June and August 2010.”  read more

Posted in Enforcement and Investigations, FERC, Oil & Gas, Power