Will Congressional Pressure on the CFTC to Share Information With FERC Bear Fruit?

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The Federal Energy Regulatory Commission (“FERC”) has identified ferreting out energy market manipulation as a priority in its enforcement efforts.  On January 2, 2014, FERC and the U.S. Commodity Futures Trading Commission (“CFTC”) signed two Memoranda of Understanding (“MOUs”) that address the agencies’ jurisdictional overlap and sharing of information related to the agencies’ market surveillance and investigations, as required by the Dodd-Frank Act. (See our previous post).  So now what?  Prior to signing the MOUs, the CFTC and FERC had failed to coordinate on energy market enforcement activities, and the CFTC’s unwillingness to cooperate was identified as the primary obstacle by Senator Ron Wyden, former Chairman of the Senate Energy and Natural Resources Committee, and others.  Read our earlier post Barriers to Cooperation between the CFTC and FERC Hinder Investigations into Energy Market Manipulation – A Legislative Fix May be on the Horizon  for details.  As of mid-January, when the CFTC testified before the Senate Banking Committee, the CFTC had not begun sharing requested information with FERC, including trading data from the CFTC’s Large Trader Report, because: “there are questions just around data transfer issues and the technical personnel need to work those things out.”   Eight U.S. Senators, including Senator Wyden, made a request to the CFTC in a February 7, 2014 letter:  get it done by the end of February.

In the February 7th letter to then Acting CFTC Chairman Mark Wetjen, the Senators proclaimed that “[i]nformation sharing between CFTC and FERC has been delayed for too long, putting our energy markets at risk of abuse unnecessarily.”  Pointing to the $45 billion it cost Americans during the Western energy crisis, the Senators urged that the lack of information sharing leads to a lack of real-time market oversight that allows “traders to rob Americans, disrupt economic activity and darken cities.”  They requested that the CFTC “address technical issues and initiate information sharing no later than the end of February.”  The Senators stressed that the CFTC should be able to address technical obstacles preventing it from sharing the Large Trader Report with FERC within weeks, given that the agency already has the technical capabilities to share data with other countries and regulators.  To the extent that the CFTC needed to upgrade its technology, the Senators asked that the CFTC “lay out those investments in detail in its spending plan for Fiscal Year 2014 funding, which [was] due to Congress by February 17.”  Interestingly, CFTC Commissioner Scott D. O’Malia dissented from the spending plan submitted by the CFTC in a February 27, 2014 statement based, in part, on the fact that “it does not allocate enough funding to new and enhanced technology investments that are essential to the efficient surveillance and oversight of the futures and swaps markets.”  What impact this, and the Sentator’s prompting, will have on the CFTC’s information sharing with FERC remains to be seen.

Topics:  CFTC, FERC, Information Sharing, Memorandum of Understanding

Published In: Energy & Utilities Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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