By Kathy Larsen
The Commodity Futures Trading Commission has begun regular information-sharing with the Federal Energy Regulatory Commission after several years of wrangling and pressure from the Senate to make good on promises of cooperation.
The CFTC is now sending FERC its Large Trader Report on a routine basis so FERC will not have to request it case-by-case for market surveillance.
The sharing, which followed memorandums of understanding the agency heads signed in January, is a milestone in the government’s efforts to police market manipulation. But conflicts over the two agencies’ jurisdiction are still being played out in court.
As the commissions announced their initial data-sharing last week, they also announced establishment of a staff-level Interagency Surveillance and Data Analytics Working Group to coordinate the sharing “and focus on data security, data-sharing infrastructure and the use of analytical tools for regulatory purposes.”
Last month, eight senators leaned on the CFTC to make good on the sharing promised in the Jan. 2 MOUs, which were required by the 2010 Dodd-Frank law.
Sen. Dianne Feinstein (D-Calif.), who has pressed the agencies more than once for action, last week commended them for starting the “overdue” sharing. “FERC investigators have caught multiple entities manipulating California’s markets in recent years – even without access to this critical data,” she said. “I am hopeful the trading data … will allow FERC to prevent the complex and sophisticated schemes that robbed consumers and disrupted economic activity during the Western energy crisis.”
One of the January MOUs outlined a process by which the commissions would notify each other of activities that may involve overlapping jurisdiction, and when entities request authorization or exemptions that may fall in that overlap. The other MOU established processes for sharing information of mutual interest.
The eight senators who wrote to the CFTC Feb. 10 said they were impatient that no concrete action had taken place yet because of what the CFTC had said were data transfer issues.
“Considering the CFTC’s technical ability to share data with other nations and other regulators,” the senators wrote to CFTC acting Chairman Mark Wetjen, “we believe that technical barriers preventing the sharing of information with FERC — a fellow arm of the federal government — could be addressed and solved in a matter of weeks under your direction and leadership.” The trader-report sharing came a few weeks later.
The CFTC has not yet asked for access to FERC data on an ongoing basis.
Questions surrounding the exchange of information are only part of the conflict that has characterized the commissions’ relationship. FERC lost a fight to pursue a market manipulation case against Brian Hunter, of hedge fund Amaranth Advisors, when the U.S. Court of Appeals for the District of Columbia Circuit ruled the CFTC had exclusive jurisdiction over the matter.
FERC has continued to assert its jurisdiction, however, particularly in the power arena. Last year it ordered Barclays Bank PLC to pay $470 million in fines and disgorged profits for allegedly manipulating California’s power markets.
The bank challenged FERC’s authority, saying the agency lacks jurisdiction over transactions that involve futures and swaps and do not involve actual physical transmission or delivery of power.
The case is pending before the U.S. District Court for the Eastern District of California (FERC v. Barclays Bank PLC et al., Case No. 2:13-cv-02093-TLN-DAD).
Attorneys at Bracewell & Giuliani said the case’s “resolution may significantly affect the scope of FERC’s enforcement authority going forward.”
The commission seems to agree. In a filing in February, FERC said that a ruling in Barclays’ favor would “eviscerate the regulation of wholesale electricity markets contemplated” in the Federal Power Act.
