As you may already be aware from news reports, the Renewable Fuels Association has written to the heads of the CFTC and EPA to urge an investigation into possible manipulation of the RIN market. The letter specifically focuses upon escalating prices through June into July and asserts that, “[g]iven the evidence of ample RIN supplies, the recent spike in RIN prices appears contrived and driven by something other than basic supply-demand fundamentals. Indeed, the spike raises renewed questions about potential manipulation of the markets by entities who may believe the specter of higher RIN prices supports their political efforts to repeal or reform the RFS.” A copy of the letter is attached.
It seems very likely that this appeal will cause the agencies to at least do some preliminary investigation to determine if there is anything behind these claims. As we previously reported, in March of this year, the EPA and the CFTC entered into a Memorandum of Understanding designed to facilitate the ability of the CFTC to use its expertise in market manipulation to assist the EPA in overseeing the RFS and particularly the trading in RINs. This appears to be the perfect opportunity for that assistance to be exercised and demonstrated. And as Aitan Goelman, the CFTC Director of Enforcement, was quoted as saying earlier this year, “We have in the last year or two really started to play with some of the shiny new toys that Congress gave us: the new anti-manipulation authority, the anti-spoofing authority. You can expect us to continue to do that.” The CFTC has demonstrated its willingness to take aggressive positions on what constitutes manipulation law, for instance in the ongoing cases against DRW and Donald Wilson, in which it is asserting that even trading intended to move prices towards a more accurate market price is illegal, and against Kraft, in which it is claiming Kraft took and traded market positions that themselves communicated an inaccurate message about Kraft’s intentions.