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January 01, 2013
Brattle Senior Consultant Shaun Ledgerwood Featured in EnergyRisk Magazine Article on Market Manipulation Prosecution by the U.S. Federal Energy Regulatory Commission

Shaun Ledgerwood, a senior consultant in Brattle’s Washington, DC office, was recently quoted in an EnergyRisk Magazine article on the U.S. Federal Energy Regulatory Commission’s (FERC) recent crackdown of market manipulation cases in energy markets and the potentially serious implications for firms and traders involved in U.S. power and natural gas markets.

The investigations by the FERC have heated up recently, and the flurry of enforcement activity has spooked power traders, according to the article. In the past two years, the FERC has grabbed headlines with a number of large market manipulation investigations, involving big-name firms such as Barclays, Deutsche Bank, JP Morgan, and Constellation Energy. In the article, Dr. Ledgerwood discusses a specific trading practice that is common across these cases and now vigorously prosecuted by the FERC: “uneconomic trading,” i.e. the intentional execution of trades that lose money on a stand-alone basis to bias prices or other market mechanisms in benefit related market positions. This sort of trading is regarded by the FERC as fraud, since it injects false information into the marketplace as a way. Dr. Ledgerwood opines that, previously, many traders believed that it was acceptable to lose money on a specific position if it benefited their broader portfolio and, in fact, there are still many who see nothing wrong with this practice. However, he believes the world has changed given the FERC’s authority under its fraud-based anti-manipulation rule, and that firms and individual traders must respond to remain compliant with the new regulatory environment.