Clifford Chance
Court Rejects CFTC's Expansive Definition of Price Manipulation
4 October 2016
On September 30, 2016, a New York federal court ruled in a U.S. Commodity Futures Trading Commission's enforcement action against Donald R. Wilson and DRW Investments, LLC, rejecting the CFTC's recent controversial litigation position that a trader can be guilty of attempted price manipulation based upon futures contract orders entered with the intent to merely influence prices. As we previously wrote in July, this position created significant uncertainty for market participants, especially larger traders whose normal order size could reasonably be expected to influence price. The court's decision reaffirmed over 30 years of CFTC and judicial precedent, which has distinguished unlawful price manipulation from legitimate market activity by requiring proof of a specific intent to create an "artificial price," rather than intent to merely influence price. The decision represents a setback in this particular enforcement action as well as for the CFTC's overall effort to broaden its scope of its longstanding anti-manipulation authority.
