CFTC Seeks Comments Regarding ICE Futures U.S. Rules Governing Trading on Non-Public Information After ICE and NYMEX Interpretations Differ on “Pre-Hedging” Block Trades

The Commodity Futures Trading Commission’s (“CFTC”) is seeking comments regarding an amendment (Submission No. 16-67) ICE Futures U.S. (“ICE”) has proposed to its Block Trade Frequently Asked Questions (“Block Trade FAQ”) to clarify “the extent to which parties may engage in pre-hedging or anticipatory hedging related to the consummation of a block trade.” Specifically, the amendment clarifies that, as a general matter, “Parties to a block trade may engage in pre-hedging or anticipatory hedging of the position that they believe in good faith will result from the consummation of the block...

U.S. Futures Exchanges Disciplinary Actions Report - May 2016

NYMEX NYMEX 15-0150-BC-3 and NYMEX 15-0150-BC-4 EFRP Violation of Rule 538.C – Exchange for Related Positions – Related Position. On August 15, 2014, September 5, 2014 and September 24, 2014, a non-member entity allegedly executed three non-bona fide Exchange for Related Position (“EFRP”) transactions in various energy products. In addition, on August 4, 2014, a second non-member entity allegedly entered into a non-bona fide EFRP transaction on behalf of two managed customer accounts. Both entities failed to evidence an associated related position for the EFRP transactions, thus rendering the...

FERC Accepts CAISO’s Proposed Tariff Amendments Addressing Inoperability of Aliso Canyon

On June 1, 2016, the Federal Energy Regulatory Commission (FERC) accepted revisions to the California Independent System Operator (CAISO) tariff to address market conditions associated with the limited operability of the Aliso Canyon natural gas storage facility. [1] Aliso Canyon, one of the largest natural gas storage facilities in the country, has been closed since October 2015, when a large natural gas leak was discovered there. As a result of the closure, concerns were raised about potential reliability issues entering into the high demand summer months, prompting CAISO to file proposed...

Ninth Circuit Affirms Dismissal of Class Action Suit Associated with NERC Reliability Violations

On March 2, 2016, in an unpublished opinion , the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”) affirmed the judgement of the district court dismissing a class action suit brought by individuals and business entities located within the State of California (the “Plaintiffs”) against the Arizona Public Service Company (“APS”). Waldon v. Ariz. Pub. Serv. Co. , No. 14-55076 (9th Cir. Mar. 2, 2016). The Plaintiffs alleged that APS violated North American Electric Reliability Corporation (“NERC”) reliability standards adopted by the Federal Energy Regulatory Commission (“FERC”)...

Delaware Chancery Court Dismisses Challenge to MLP Drop Down Transaction

The Delaware Chancery Court recently dismissed a challenge to a transaction in which a master limited partnership (the "MLP") repurchased an interest in a crude oil pipeline in 2015 previously sold to its general partner (the "General Partner") in 2009. The plaintiff alleged that the defendants, in the course of approving the transaction, breached the MLP’s limited partnership agreement, the implied covenant of good faith and fair dealing and default fiduciary duties. In finding for the defendants, the court concluded that under the applicable standard set forth in the limited partnership...

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