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  1. Monthly Futures Exchange Issuance Report: November 2015

    Friday, December 18, 2015 9:53 am by , , and

    November’s Highlight

    In November there were a significant number of disciplinary actions across the exchanges related to pre-arranged trading, including the execution of block trades. The exchanges clearly continue to focus on these types of violations and market participants should be conscious of the rules for pre-arranged trading and the entry of block trades. The fines for these violations can be significant and can include suspensions. For example, this month an entity was fined $70,000 for the actions its traders took to enter buy and sell orders opposite one another to transfer positions, a violation of Rule 4.02(c). On NYMEX, an entity executed numerous improper block trades, a violation of Rule 526, and was fined $50,000.

    On a related note, CME recently issued a new webcast on EFRPs, transactions that have recently been heavily scrutinized by the exchanges. The new webcast is available here.

    (more…)


  2. 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…)


  3. FERC Issues 2015 Report On Enforcement

    Tuesday, November 24, 2015 5:00 pm by and

    On November 19, 2015, the Federal Energy Regulatory Commission (“FERC”) released its annual report on enforcement activities for fiscal year 2015.  The report highlights FERC’s continued focus on incidents involving fraud, market manipulation, and other anticompetitive conduct in the markets subject to its jurisdiction.  It also highlights the types of activities and conduct that have been subject to FERC scrutiny over the past year and provides informal guidance that jurisdictional entities should consider when evaluating their own conduct and compliance programs. (more…)


  4. Recent Drone Developments and a Look Ahead to 2016

    Friday, November 13, 2015 3:56 pm by

    The 2012 Federal Aviation Administration Modernization and Reform Act called for the Federal Aviation Administration (“FAA”) to institute a program to facilitate the safe integration of civil unmanned aircraft systems (“UAS”) into the National Airspace System (“NAS”) by September 30, 2015. While the legislatively imposed deadline passed with no regulatory program in place – and such a program is unlikely to be finalized until at least mid-2016 – 2015 has been a year for significant developments in UAS integration. FAA’s approvals under the Section 333 exemption process have skyrocketed, drafting of the final small UAS rule is wrapping up, the FAA recently proposed the largest penalty ever for the unauthorized operation of a UAS and announced the creation of a UAS Registration Task Force. (more…)


  5. Monthly Futures Exchange Issuance Report: October 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…)


  6. What Constitutes a Reasonable and Prudent Operator?

    9:18 am by , and

    The English Commercial Court interprets the definition of the standard of a “Reasonable and Prudent Operator” in the context of a dispute relating to long term gas sales agreements

    The phrase “reasonable and prudent operator” is frequently used in commercial contracts in the oil and gas industry to specify the standard at which a party must perform a particular obligation (or group of obligations).  Helpfully, contracts often define the phrase in order to give the content of that standard greater substance, albeit a definition that inevitably imports a degree of subjective judgement. (more…)


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