The CFTC will not appeal a decision against the agency for failing to prove that a Chicago firm had attempted to manipulate the price of certain interest rate swaps. CFTC Director of Public Affairs Erica Elliott Richardson asserted that while the CFTC will not proceed with this particular case, it will continue to enforce its anti-manipulation provisions and prosecute cases through trial where warranted.
Commentary / Bob Zwirb
This decision is both wise and warranted. Had the CFTC prevailed, it would have penalized trading conduct that the court found contributed to the price discovery process. That is, it would have penalized the relevant firm for more accurately assessing the fair market value of a contract than other traders and taking advantage of that better understanding. As the court noted, "[t]hat's what markets are for." Indeed, it would have penalized trading conduct that, as Professor Craig Pirrong observes, contributed to a convergence of settlement prices for swaps to their actual fair value. Finally, as previously noted, it would have read the element of artificial price out of the law.
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