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June 20, 2014
Shaun Ledgerwood Quoted in EnergyRisk Article Discussing Increased Use of Surveillance Technology in Commodities Trading

Brattle principal Shaun Ledgerwood was recently cited in an EnergyRisk article on the use of technology in monitoring commodities trading for potential manipulation-like behavior.

In recent years, due to an increase in the scrutiny of energy trading by regulators worldwide, banks, energy trading firms, and utilities, who are fearful of the potential costs of market manipulation investigations, have begun taking steps to curb these practices. Specifically, they are increasing their investment in both software to monitor trader communications and in surveillance tools that allow companies to detect patterns of suspicious activity by their traders.

One of the primary reasons for this increased demand for security and compliance is the rash of high-profile enforcement actions brought by the Federal Energy Regulatory Commission (FERC). In the article, Dr. Ledgerwood, a former economist in the FERC’s Office of Enforcement, discusses how the increased scrutiny and investment in technology by regulators has created an incentive for energy companies to implement similar internal trade surveillance systems.

“The behaviour that occurs today can be viewed forensically by regulators for years to come.” Dr. Ledgerwood states in the article. “So by the time an investigation starts, a rogue trader responsible for that behaviour may have received their bonus check and moved on; then the company is left to shoulder the burden of the investigation and its associated costs. So firms are now opting to implement internal surveillance systems to prevent that possibility."