Federal Energy Regulatory Commission v. Barclays Bank PLC
United States District Court for the Eastern District of California
105 F. Supp. 3d 1121 (2015)
- Written by Brett Stavin, JD
Facts
[Ed’s note: The casebook excerpt summarizes the discussion of this case from 36 No. 11 Futures and Derivatives Law Report 1 (2016). It includes notes from that article on the case.] Barclays Bank PLC (Barclays) (defendant) engaged in the trading of electricity. There were two ways that Barclays went about trading electricity. Barclays would sometimes trade electricity physically, in which case the parties had an obligation to deliver or receive the actual electricity. Other times, Barclays traded electricity financially, in which case the parties used swaps to effectuate the trades. Each swap involved one party designated as the fixed payer and the other party designated as the floating payer. The fixed payer would pay the floating payer a fixed rate for the electricity multiplied by the notional amount of the swap. In exchange, the floating payer would pay the fixed payer an amount based on the volume-weighted average price on the Intercontinental Exchange. The Federal Energy Regulatory Commission (FERC) (plaintiff) alleged that Barclays used the physical trading to manipulate the prices of electricity quoted on the Intercontinental Exchange, thereby benefiting Barclays when Barclays traded in swaps. FERC issued an administrative penalty to Barclays and initiated a proceeding in federal district court to have the penalties affirmed. Barclays moved to dismiss the proceedings on the theory that FERC lacked regulatory jurisdiction. Specifically, Barclays argued that the swaps constituted futures contracts and were therefore within the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act. At the time, however, the Intercontinental Exchange was considered an exempt commercial market over which the CFTC only had antifraud jurisdiction. Additionally, the Energy Policy Act of 2005 granted FERC jurisdiction over price manipulation in the electricity market.
Rule of Law
Issue
Holding and Reasoning (Nunley, J.)
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