Court Rules on Rights of Respondents in FERC Enforcement Actions

On April 11, 2016, the United States District Court for the District of Massachusetts issued a procedural order denying motions to dismiss actions initiated by the Federal Energy Regulatory Commission (“FERC”) seeking affirmance of two orders assessing civil penalties against Lincoln Paper and Tissue, LLC, Richard Silkman (“Silkman”), and Competitive Energy Services (“CES”) (collectively, the “Respondents”) for violating Section 222 of the Federal Power Act (“FPA”) and FERC’s Anti-Manipulation Rule. In the underlying orders, FERC found that the Respondents had engaged in market manipulation...

U.S. Futures Exchanges Disciplinary Actions Report: March 2016

ICE FUTURES ICE 2014-072 Position Limits; Misc. Violation of Rule 4.04: Conduct Detrimental to the Exchange; and Rule 6.19: Position Limits for Cotton No. 2 Contracts. Allegedly, an entity may have violated Exchange Rule 4.04 when, after Exchange Staff had encouraged the entity to reduce its sizeable position in the July 2014 Cotton No. 2 (“N14 CT”) Futures Contract in a manner consistent with an orderly liquidation for the purpose of complying with the 300 lot position limit in effect at the close of business on the day prior to First Notice Day for the N14 CT Contract, the entity waited until the final 20 minutes of trading to execute a high proportion of their transactions on the day prior to first notice day to reduce its N14 CT position. This may have resulted in a price movement in both the outright N14 CT market and the N14/ Dec 2014 CT spread market. In addition, the entity allegedly may have violated Exchange Rules 6.19(a) by holding positions that were in excess of the speculative position limit thus violating its single month position limit for N14 CT on May 30, 2014. $200,000 fine.
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Energy XXI Pursues Deleveraged Balance Sheet via Chapter 11

Yesterday, Energy XXI Ltd. became the latest domestic oil and gas company to pursue a more deleveraged balance sheet via Chapter 11 restructuring. This does not come as a surprise to those following the company – for much of the last three months Energy XXI’s stock has been trading at less than $1.00 per share. According to the press release issued by the company, the filing comes after the company reached agreement with more than 63% of second lien note holders on the material terms of the restructuring. The restructuring is intended to eliminate more than $2.8 billion in debt from the...

Industry Groups Alert FERC that the Viability of Contract Formation and Contract Sanctity are at Stake in Review of Initial Decision

On May 22, 2015, the Federal Energy Regulatory Commission (“Commission”) issued Opinion No. 537, [1] reversing the March 28, 2014 Initial Decision [2] in part and remanding for clarification and further findings by the Administrative Law Judge (ALJ). The issues on which the Commission sought clarification through the remand related to the Mobile-Sierra presumption, which the Commission had determined applied to the contracts at issue which had been made pursuant to the WSPP Agreement. [3] The Mobile-Sierra presumption holds that qualifying contracts are just and reasonable under the Federal...

U.S. Futures Exchanges Liberalize Exceptions to Position Limit Aggregation Rules

Effective March 18, 2016 and April 4, 2016 [1] respectively, the major U.S. futures exchanges, ICE Futures U.S., Inc. (“ICE”) and the CME Group exchanges (“CME Group”), [2] have amended their rules regarding aggregation of positions for purposes of determining compliance with applicable position limits and accountability levels. ICE amended Rule 6.12—Aggregation of Positions [3] and CME Group has amended Rule 559.E—Limited Exceptions to Aggregation for Independently Controlled Accounts. [4] As a result of the amendments, aggregation standards will be more straightforward and will better track...

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