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CFTC Joins in Ex-Amaranth Trader's Appeal of FERC Fine

The Commodity Futures Trading Commission (CFTC) Wednesday filed an intervenor brief on behalf of former Amaranth gas trader Brian Hunter, who is appealing an order by the Federal Energy Regulatory Commission (FERC) for fining him $30 million for allegedly manipulating the gas futures market.

In the briefing filed in the U.S. District Court of Appeals for the District of Columbia Circuit, the CFTC said it intervened in the case because "FERC's assertion of jurisdiction directly conflicts with the express statutory grant of exclusive jurisdiction to the CFTC over futures trading on futures exchanges."

The two federal regulatory agencies have butted heads over the issue of whether FERC has jurisdiction in cases where the manipulation of natural gas futures trades subsequently influences the price of physical gas transactions (see Daily GPI, Dec. 5, 2008).

Both Hunter and the CFTC argue that FERC doesn't have jurisdiction in these areas. The CFTC filed its own action in mid-2007 when it brought a complaint against Amaranth and Hunter for attempted gas futures market manipulation one day before FERC brought its enforcement action (see Daily GPI, July 26, 2007). The Amaranth hedge fund was liquidated in late 2006 after losing $6 billion on natural gas trades.

In April 2011, FERC held that Hunter had manipulated the gas futures market and imposed a civil penalty of $30 million (see Daily GPI,April 25, 2011). In a previous brief filed with the court, the CFTC said it supported Hunter's argument that FERC exceeded its jurisdiction by prosecuting and fining Hunter.

The jurisdictional issue that the CFTC is asking the court to settle is whether Congress, when it granted FERC new anti-manipulation powers in the Energy Policy Act of 2005, "in any way limited the CFTC's long-standing exclusive jurisdiction under the CEA [Commodity Exchange Act] over futures trading on futures exchanges."

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