Buttressed by support from a coalition of futures market associations, including the New York Mercantile Exchange (Nymex), Amaranth Advisors LLC on Wednesday again asked a New York district court to stay a FERC enforcement action against it until a parallel case by the Commodity Futures Trading Commission (CFTC) is completed.

In a reply memorandum to filings by the CFTC and the Federal Energy Regulatory Commission (FERC) last week (see Daily GPI, Oct. 3; Oct. 1), Amaranth, which is accused of manipulating natural gas markets, asked the U.S. District Court for the Southern District of New York to allow the CFTC legal proceeding to be completed first (1:07-cv-06682-DC).

“At the heart of this motion…is whether the FERC has the power to prosecute its enforcement action…based on the exact same conduct at issue in the instant CFTC action — allegedly improper trading of the Nymex natural gas futures contracts,” the Amaranth memorandum stated. “Only the FERC concludes that its assertion of jurisdiction over Amaranth’s trading in natural gas futures is proper. The industry associations and exchanges that filed an amicus brief, including Nymex, where the trading at issue took place, strongly maintain that the CFTC has exclusive jurisdiction.”

The filings in support of FERC reiterated the agency’s arguments, but “their silence on the issue of jurisdiction is deafening,” the Amaranth brief stated. “The FERC’s own statements in adopting its anti-manipulation rule similarly concede that the CFTC has exclusive jurisdiction. In short, based on the submissions and the law, it is beyond a doubt that the FERC’s administrative proceeding is ultra vires” (beyond the power).

To avoid “judicial reckoning,” stated the Amaranth reply, “FERC hides behind procedural arguments,” and it “also argues that this court should ignore the doctrine of primary jurisdiction, which requires deference to the CFTC’s expertise as to futures markets…The law is clear, however: when an agency exercises power ultra vires, the object of that ultra vires exercise of power is irreparably harmed. Competing and inconsistent regulatory standards and enforcement regimes over a market that Congress has placed in the exclusive hands of the CFTC also causes irreparable harm…”

In an amicus brief in support of the CFTC’s jurisdictional authority in the case, a futures group composed of the Managed Funds Association Inc., the International Swaps and Derivatives Association Inc., the Futures Industry Association Inc., Nymex and the Chicago Mercantile Exchange Group Inc. (CME), the group said it “expresses no view on Amaranth’s guilt or innocence.”

However, “exclusive jurisdiction is not a matter of agency turf: it was intended instead to make the CEA [Commodity Exchange Act] and CFTC regulations supreme as the body of law for futures markets and trading thereon. CEA exclusive jurisdiction is therefore central to the public interests served by, as well as the operation and competitiveness of, the U.S. futures markets. Allowing FERC to proceed now would undermine those interests.”

The futures group noted that for 32 years the CEA and the CFTC regulations have provided a “single legal standard — the intentional creation of an artificial price — for deciding whether a futures market price was manipulated. Every day, the Nymex, CME and other self-regulating futures exchanges apply that standard to discharge their statutory duties…”

FERC’s “claim has generated considerable uncertainty among self-regulatory bodies like Nymex and CME, as well as futures market participants,” the group stated. “Congress enacted CEA exclusive jurisdiction because it did ‘not believe the public interest would be served by duplicating in one or more additional agencies regulatory authority over futures markets that presently exist in the CFTC.’ Neither does the futures group. Neither should this court.”

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.