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October 24, 2016

24 October 2016

CFTC Issues Final Order to Exempt Certain SPP Transactions and Amends the 2013 Final Order to Exempt RTO/ISO Transactions From Private Rights of Action

On October 18, the CFTC approved a final order in response to a petition from Southwest Power Pool, Inc. (SPP) for exemption of certain transactions in the SPP market.  The CFTC’s final order exempts certain specified transactions within SPP from the Commodity Exchange Act (CEA) and CFTC regulations, with the exception of the CFTC’s general anti-fraud and anti-manipulation authority, and scienter-based prohibitions.  In addition, the final order expressly exempts such transactions from private actions under CEA section 22.  Other than the express addition of the exemption from private actions, the final order for SPP is similar to the CFTC’s March 28, 2013 final order that exempted specified transactions of six other RTOs/ISOs from certain provisions of the CEA and CFTC regulations.  In addition, the CFTC issued an amendment to the 2013 final order related to the other RTOs/ISOs.  The amendment explicitly provides that the transactions covered under the 2013 order are exempt from private actions under CEA section 22.

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24 October 2016

Spoofing Case Settled – Oystacher and 3Red Trading Settle with the CFTC

On October 19, Igor Oystacher and his firm, 3Red Trading, announced in court that they had reached an agreement in principle with the CFTC that settles a spoofing lawsuit ahead of trial scheduled for January in the U.S. District Court for the Northern District of Illinois.  Oystacher and 3Red Trading faced allegations that they placed fake orders on several futures markets in order to make money based on resulting price fluctuations.  The CFTC sued Oystacher in October 2015, alleging that he placed false buy and sell orders on six contract markets (including copper, crude oil and natural gas) between 2011 and 2014.  According to the CFTC, Oystacher never intended to fill those orders, but instead used these “spoof” orders to take advantage of the resulting misperceptions about market demand.  Lawyers for the parties told the court that minor details of the agreement still needed to be finalized, but those details likely would not hold up the settlement.

Notably, Judge St. Eve recently rejected Oystacher’s viewpoint that the statute didn’t give traders fair notice of potential misconduct.  In denying his motion to dismiss, Judge St. Eve said that economic laws and regulations have a much less stringent vagueness standard than other laws because those participating in the markets are much more likely to consult the law.

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