Bracewell & Giuliani

Powered by the attorneys of Bracewell & Giuliani, Energy Legal Blog® is your resource for updates and analysis on national and global energy issues.
  1. New CFTC Proposed Rules on Algorithmic Trading

    Monday, November 30, 2015 10:49 am by

    On November 24, 2015, the Commodity Futures Trading Commission (CFTC) unanimously approved its long awaited Notice of Proposed Rulemaking (NOPR) on automated trading.  The commodities markets have faced a number of unexpected volatility incidents over the past few years, most notably the May 2010 flash crash.  Beginning in 2011, the CFTC raised a number of questions concerning regulating algorithmic trading in an Advanced Notice of Proposed Rulemaking concerning disruptive trading practices.  In 2013, the agency released a detailed Concept Release that formed the foundation for these proposed rules.  The NOPR, dubbed Regulation AT, is intended to, among other things, protect the markets from untested algorithms, algorithms that do not function as designed and to require those that use algorithms to be registered with the Commission.  CFTC Chairman Timothy Massad stated that the proposal “contains a number of common-sense risk controls that I believe recognize the benefits that automated trading has brought to our markets, while also seeking to protect against the possibility of breakdowns.”  Regulation AT assigns various risk controls to clearing futures commission merchants (FCMs), designated contract markets (DCMs), and to users of algorithmic trading systems, designated as “AT Persons.”  The CFTC defines algorithmic trading where “one or more computer algorithms or systems determines whether to initiate, modify, or cancel an order.”  (more…)

  2. Monthly Futures Exchange Issuance Report: October 2015

    Friday, November 13, 2015 2:11 pm by , , and

    October’s Highlight

    October saw the first criminal conviction pursuant to Section 4c(a) for spoofing.  A jury concluded that for approximately three months, an individual used a computer algorithm to place orders he did not intend to execute for the purpose of giving the impression that there was significant interest in orders he placed on the other side of the market.  The individual and his trading company had already settled allegations of spoofing with multiple CME Group exchanges (CBOT, CEI, CME, and NYMEX) as well as the CFTC in 2013.  The CFTC settlement required both to pay a $1.4 million civil penalty and disgorge $1.4 million in trading profits, and included a ban from trading on any CFTC-registered entity for one year.  Further, the indivdiual also was ordered to pay the CME exchanges a combined $200,000 fine and $1.3 million in disgorgement, in addition to exchange-specific trading bans. (more…)

  3. Monthly Futures Exchange Issuance Report: September 2015

    Tuesday, October 20, 2015 8:00 am by , , and

    September’s Highlight

    September saw a handful of settlements of ICE Futures enforcement actions related to position limit violations under Rule 6.20(b).  The settlements of these actions included monetary fines, disgorgement of profits, and cease and desist orders.  Of note, an action related to a single, self-reported violation of the applicable spot month position limit under Rule 6.20(b) resulted in a $35,000 fine and a cease and desist order.  These settlements serve as reminders that position limits are tracked intra-day and to the single lot, and exceeding a position limit is a per se violation absent an exemption. (more…)

  4. FERC Proposes To Expand Classes Of Information Collected From Participants In RTO And ISO Markets

    Tuesday, September 22, 2015 3:13 pm by and

    On September 17, 2015, the Federal Energy Regulatory Commission (“FERC”) issued a notice of proposed rulemaking (“NOPR”) proposing to significantly expand the information that entities would be required to disclose in order to participate in the wholesale markets administered by Regional Transmission Organizations (“RTO”) and Independent System Operators (“ISO”).  Notably, while market participants already are required to disclose certain affiliate relationships to the RTOs and ISOs in which they participate, FERC’s proposal would require market participants to provide additional information regarding a broad array of contractual, employee, and other business relationships.  (more…)

  5. Monthly Futures Exchange Issuance Report: August 2015

    Friday, September 11, 2015 8:38 am by , , and

    August’s Highlight

    This past month, the NYMEX Business Conduct Committee (“Panel”) entered into a settlement with an entity to resolve alleged violations of Exchange Rule 526- Block Trades and two Market Regulation Advisory Notices, RA1326-4 and RA-1327-4, related to pre-hedging of block trades.  The settlement resulted in a fine of $50,000 and disgorgement of $51,315.60 in profits, as well as a $15,000 fine and 5-day suspension against the individual trader involved.

    Specifically, the Panel found that on four different trade dates the trader pre-hedged block trades by “trading on Globex prior to consummating the block trade with the counterparty.”  The hedge was placed after soliciting but before consummating the block trade and locked in a profit.  The trader also failed to timely report two of the block trades. (more…)

  6. BP Initial Decision: The Significance of Change

    Wednesday, August 19, 2015 8:10 am by , , and

    On August 13, 2015, the administrative law judge (“ALJ”) assigned to hear evidence in BP America Inc. et. Al (Docket No. IN13-15) issued an Initial Decision in which she found that BP America Inc., and certain of its affiliates (collectively “BP”) engaged in market manipulation by intentionally trading to influence index prices to benefit a related financial position.  Putting aside the merits of the BP case, the Initial Decision is a good reminder of the kind of circumstantial evidence that regulators might interpret as indicia of manipulation.  The reoccurring theme is CHANGE.  (more…)

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