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April 16, 2014

Federal Court Rules Federal Energy Regulatory Commission (FERC) Does Not Have Authority to Fine Trader for Manipulation of Futures Contracts

Pursuant to the Energy Policy Act of 2005, the Federal Energy Regulatory Commission (FERC) fined a natural gas trader $30 million for manipulating the settlement price for natural gas futures contracts on the New York Mercantile Exchange by selling a significant number of contracts in a manner designed to affect the settlement price for those contracts. According to the trader, the FERC could not fine him because the Commodity Futures Trading Commission has exclusive jurisdiction over all transactions involving commodity futures contracts. The trader petitioned the US Court of Appeals for the District of Columbia Circuit for review; the CFTC intervened in support of the trader. The court found that Congress intended Section 2(a)(1)(A) of the Commodity Exchange Act to give the CFTC exclusive jurisdiction over transactions conducted on futures markets. The court granted the trader’s petition for review, finding that manipulation of natural gas futures contracts falls within the CFTC’s exclusive jurisdiction and that nothing in the Energy Policy Act clearly repeals the CFTC’s exclusive jurisdiction. Hunter v. Federal Energy Regulatory Commission, No. 11-1477 (March 15, 2013).

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©2014 Katten Muchin Rosenman LLP

About the Author

Kenneth M. Rosenzweig, Katten Muchin Law Firm, Financial Institutions
Partner

Kenneth M. Rosenzweig focuses his practice on financial services matters, with an emphasis on the trading and clearing of financial instruments. Ken represents derivatives clearing organizations, designated contract markets and swap execution facilities, in addition to futures commission merchants, banks and other commercial participants in the exchange-traded and over-the-counter derivatives markets.

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About the Author

Staff Attorney

Tanja Samardzija concentrates her practice in financial services. Ms. Samardzija began her legal career as a litigator before embarking on a career in market regulation at the Chicago Board Options Exchange (CBOE). Ms. Samardzija’s work at the CBOE has familiarized her with a wide variety of regulatory matters including exchange and SEC investigations; compliance issues related to registrations, market making and options order handling; and risk management controls and supervisory procedures for brokers or dealers with market access. In addition to being thoroughly involved in...

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