Clifford Chance
U.S. Commodities Anti-Manipulation Law and Open Market Trading
16 January 2020
A Recent Wall Street Journal Article Highlights Threat of Vague Regulation to Lawful Trading Strategies
In an article published on January 3, 2020, the Wall Street Journal caused some concern and confusion about the reach of the U.S. Commodity Futures Trading Commission to prosecute open market trading as price manipulation without proving the intent to create an artificial price. If free to do so, CFTC would have broad discretion to prohibit a variety of trading strategies long thought to be lawful. As we have explained in previous alerters, and contrary to the impression left by a quotation in the Wall Street Journal article, no court to date has found manipulation based on open-market trading absent proof of an intent to create an artificial price. If courts in fact find that the CFTC can prove manipulation without this intent, then all sizeable trades in a given market—including completely legitimate trades—would be subject to a significant risk of mischaracterization as manipulative trades, due to their inevitable price impact.
