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  1. Monthly Futures Exchange Issuance Report: April 2015

    Tuesday, May 5, 2015 1:23 pm by , , and

    This report summarizes material notices from CME Group and ICE Futures, with a particular focus on energy. It is not intended to be a comprehensive review of each and every notice issued by these Exchanges.

    On April 21, 2015, the CFTC announced via press release that charges had been filed against a resident of the United Kingdom (“UK”), Navinder Singh Sarao (“Sarao”), and his company, Nav Sarao Futures Limited PLC, for price manipulation and spoofing. The charges came after a comprehensive investigation of Sarao’s trading activity by the CFTC, which included assistance from the SEC, DOJ, FBI, the CME Group, the UK’s Financial Conduct Authority (“FCA”), and Scotland Yard. The DOJ unsealed its own criminal Complaint charging Sarao with willfully engaging in a scheme to defraud, knowingly manipulating the price of a commodity, and knowingly engaging in trading practices in violation of CME rules. Sarao was arrested by British authorities shortly before the CFTC and DOJ charges were unveiled. (more…)


  2. FERC Assesses $5 Million Penalty Against Maxim Power for Alleged Manipulation of ISO-NE Market and for Misleading the Independent Market Monitor

    8:18 am by

    On May 1, 2015 the Federal Energy Regulatory Commission (FERC) assessed a $5 million civil penalty against Maxim Power Corporation (Maxim) and its affiliates and an additional $50,000 civil penalty against Kyle Mitton, an energy marketing analyst working for Maxim, for allegedly violating FERC’s anti-manipulation rule and a regulation against submitting false or misleading information to a market monitor. Specifically, FERC alleges that Maxim bid in its Pittsfield generating plant in the ISO-NE day ahead market on oil during certain hot summer days in 2010 when it actually ran on much cheaper natural gas. According to FERC, Maxim hoped to be paid the significantly higher oil price even though it actually ran on cheaper natural gas. FERC maintains that Maxim mislead the ISO-NE Independent Market Monitor (IMM) when its bidding was questioned, giving the IMM the impression that Maxim actually ran on oil. This misrepresentation, according to FERC, also constituted a fraud in violation of FERC’s anti-manipulation rule. Maxim, on the other hand, argued in response to FERC’s earlier Order to Show Cause that due to pipeline restrictions serving the Pittsfield plant, it bid conservatively to avoid running on a fuel costing more than it bid into the market. Maxim further states that it never provided false information to the IMM. FERC admits that Maxim did not make a false statement and that it eventually did disclose to the IMM that it ran on natural gas. In the end, Maxim was not paid the more expensive price for oil; instead the IMM mitigated the price Maxim was paid to run the Pittsfield plant, a mitigation $3 million. (more…)


  3. FAA Continues to Modify UAS Approval Process to Expedite Integration

    Wednesday, April 15, 2015 9:20 am by

    By the end of 2014, the Federal Aviation Administration (FAA) had approved less than 15 Section 333 exemptions authorizing unmanned aircraft systems (UAS) operations. Roughly three months later, that number has jumped to over 130 Section 333 exemptions approved. The surge in approvals can be attributed to recent changes in the FAA’s approval process as well as increasing pressure from the White House and industry to speed up UAS integration. A few of the recent changes implemented by the FAA include introduction of a “blanket” COA, reliance on a “summary grant” process, and dialing back of certain prerequisites to approval.   (more…)


  4. Monthly Futures Exchange Issuance Report: March 2015

    Thursday, April 2, 2015 9:24 am by

    This report summarizes selected material notices from CME Group and ICE Futures, with a particular focus on energy. It is not intended to a be a comprehensive review of each and every notice issued by these Exchanges.

    March’s Highlight 

    This month CME Group announced that it will launch a physically delivered crude oil storage futures contract, the first-ever of its kind, in reaction to extremely high levels of stockpiles of crude oil available nationwide and the demand for storage capacity. The futures contract—LOOP Crude Oil Storage Futures—will represent the right to store 1,000 barrels of crude at LOOP LLC’s Clovelly Hub in Louisiana. LOOP LLC is the operator of the largest privately-owned crude oil terminal in the United States. On March 30, 2015, pending all regulatory review periods, NYMEX will implement new Rule 710 into Chapter 7 of the Rulebook to incorporate certain conditions and requirements with which the LOOP facility must comply in its capacity as the operator of the delivery location for the LOOP Crude Oil Storage Futures contract. (more…)


  5. 41 Questions the FAA Is Asking in Its ANPR on Small UAS / Drones

    Tuesday, March 10, 2015 1:17 pm by

    drone3Recently, the Federal Aviation Administration (FAA) published in the Federal Register its Notice of Proposed Rulemaking focused on the Operation and Certification of Small Unmanned Aircraft Systems (UAS) or “drones” within the United States. The publication in the Federal Register starts the clock on the 60-day comment period, which at this point ends on April 24, 2015.   My recent blog outlined the FAA’s general framework for the UAS ANPR, including the main operating limitations.

    Today, I’ve listed below some of the major areas where the FAA is seeking input from stakeholders, including Risk Mitigation, Line-of-sight, Payload, International, Size Class, Crewmember, Testing Site, and other issues. Among other things, the FAA is looking for comments on the feasibility of its proposal, alternatives, any new technology that could inform its decision, data and studies.

    The FAA specifically is seeking comment on: (more…)


  6. Monthly Futures Exchange Issuance Report: February 2015

    Tuesday, March 3, 2015 1:01 pm by , , and

    February’s Highlight

    This month, CME Group announced fines totaling $1.75 million against derivatives broker Newedge USA for violations of exchange rules in certain metal markets over the course of two years.   Newedge agreed to the fine pursuant to an offer of settlement in which Newedge neither admitted nor denied the rule violations upon which the penalty was based.  Specifically, Panels for both the NYMEX Business Conduct Committee and the COMEX Business Conduct Committee found that Newedge violated exchange Rule 432, Rule 529, Legacy Rule 538.A, Legacy Rule 538.G, and Legacy Rule 538.H., while a clearing member of the exchange.

    According to the disciplinary action notices released by the exchange, on multiple occasions over a two year period, employees working for Newedge, but trading accounts of a Newedge affiliate, executed EFRPs as a counterparty with its customers that were not bona fide.   While trading in Gold and Silver futures, Newedge employees received orders from customers, including market and limit orders, which were executed as EFRPs instead of directly on Globex as was expected by the customers.   In executing the EFRPs, Newedge typically entered them with a liquidity provider and then entered a separate EFRP at a marked-up price with the customer.  The Panel found that at times the price of the EFRP with the customer was simply set by Newedge and was therefore not negotiated in those instances.   In addition, the Panel found that for the OTC leg of the EFRP transactions, Newedge had inadequate documentation.   Further, in many instances Newedge did not designate the trades on the customer account statements as EFRPs because of an operational error.  Of the $1.75 million fine, $650,000 was allocated to NYMEX and $1,100,000 was allocated to COMEX. (more…)


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