Proposed FTC Anti-Manipulation Rule Could Affect Energy Businesses and Futures Traders
By Charles R. Mills and Lawrence B. Patent
Energy businesses and traders in energy futures markets should be aware that the Federal Trade Commission (FTC), acting under authority granted in last year’s energy bill, proposed a new anti-manipulation rule in August that would prohibit the use of manipulative or deceptive devices or contrivances in wholesale crude oil, gasoline or petroleum distillate markets. The FTC states in the Federal Register notice announcing the proposals that its rules in this area are modeled on SEC Rule 10b-5. The FTC thus would become part of the posse of federal agencies searching for villains to blame for the run-up in energy prices earlier this year. The FTC is taking this action despite the fact that, in response to its Advance Notice of Proposed Rulemaking in this area, even very few consumer commenters supported an FTC anti-manipulation rule.
No safe harbor for futures traders. Despite comments on an Advance Notice of Proposed Rulemaking that a safe harbor provision or other explicit exemption for the futures markets is necessary to avoid overlap with CFTC (Commodity Futures Trading Commission) jurisdiction over futures markets, the FTC does not believe that a safe harbor or exemption is warranted. Although the FTC points to its prior practice of coordinating enforcement efforts with other agencies, the CFTC has continued to urge the FTC to reconsider its opposition to a carve-out of the futures markets from the FTC’s rule. The extended comment period on the FTC’s proposed rule closed on October 17, 2008, and the FTC has scheduled a public workshop on the proposals for November 6, 2008.
Are three heads better than one? Energy businesses and futures traders may need to be mindful of the FTC in addition to the CFTC and the Federal Energy Regulatory Commission (FERC). The CFTC and FERC continue to debate their respective jurisdictions over energy futures markets, which has been highlighted by the agencies separately bringing competing enforcement actions against the now-defunct hedge fund Amaranth Advisors, LLC with respect to its trading in the natural gas futures market.
