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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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About this Author

Kenneth M. Rosenzweig, Katten Muchin Law Firm, Financial services matters
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.

Formerly Assistant Chief Counsel and Associate Director in the Division of Trading and Markets of the Commodity Futures Trading Commission (CFTC)...

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