The Commodity Futures Trading Commission vehemently rejected friend of the courts’ (amici) submissions submitted in its enforcement action against Donald Wilson and DRW Investments alleging attempted manipulation. (The CFTC initially filed its lawsuit in 2013, claiming the defendants manipulated and attempted to manipulate the settlement prices of the IDEX USD Three-Month Interest Rate Swap Futures contract on numerous occasions in 2011.) Among other things, the CFTC claimed that the amici’s submissions “jettison[ed] without reference all adverse case law.” The CFTC said amici were wrong when they claimed that it must prove an intent to create an artificial price in order to prevail on its attempted manipulation charge against defendants.

Legal Weeds: In its summary of its Anti-Manipulation and Anti Fraud Final Rules (click here to access CFTC Regulations 180.1 and 180.2), the CFTC indicated that in connection with its “long-standing authority” to prohibit price manipulation “by making it unlawful … to manipulate or attempt to manipulate” (emphasis added) the price of any swap or futures contract it would be guided by its traditional four-part test for manipulation:

  • the accused had the ability to influence market prices;
  • the accused “specifically intended to create or effect a price or price trend that does not reflect legitimate forces of supply and demand;”
  • the existence of an artificial price; and
  • the accused caused the artificial price.

Certainly in a situation where the CFTC is charging only an attempt to manipulate, it is not required to prove the last two elements of its acknowledged “traditional” four-part test. But it seems disingenuous to argue that it does not have to demonstrate the first two elements. This is the CFTC’s own publication. (Click here to access the CFTC summary.)