CFTC sets out new market manipulation rules

CFTC sets out new market manipulation rules

The Commodity Futures Trading Commission is to push ahead with a tranche of new rules governing market manipulation and large trader reporting under the Dodd-Frank financial reform act.

The proposed new rules are designed to give the Commission greater freedom to pursue market manipulators and track the activities of high frequency trading firms in the futures and swaps market.

Under Dodd-Frank, the Commission will now have the ability to prosecute instances of apparent market manipulation without having to prove that the activities created an artificial price - a stumbling block which has proved a significant deterrent to successful enforcement in the past.

More detailed trade reporting is also being mandated for clearing houses and swaps dealers in the physical commodity markets, with participants required to file detailed daily reports on their positions in 46 commodities. The reports are intended to help the agency police position limits in the markets until new data repositories are up and running.

The Futures Industry Association, which has been campaigning long and hard to limit the extent of the rulemaking blitzkrieg, expressed "disappointment" that regulators had failed to listen to its entreaties.

FIA president John Damgard, says: "We are concerned that the CFTC did not provide more guidance on how it intends to apply the sweeping new powers that these rules will implement. We strongly support the CFTC's authority to pursue any and all deliberate attempts to manipulate prices or defraud participants in these markets, but the lack of clarity on how the broad new standards in the final rules will be applied has the potential to chill legitimate trading and reduce market liquidity."

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