Barclays Bank and four of its traders (collectively, “Barclays”) moved on December 16, 2013 to dismiss charges of market manipulation brought by FERC’s Office of Enforcement. FERC’s complaint seeks to affirm a combined $488 million in civil penalties and disgorgement in federal court for the Eastern District of California based on its claim that Barclays manipulated Western electricity markets between 2006 and 2008 (FERC v. Barclays Bank, No. 2:13-cv-02093). In particular, FERC alleges that Barclays built and then flattened substantial physical index positions at four trading points in the West in order to manipulate an Intercontinental Exchange (ICE) index to benefit the bank’s financial swap positions. In proceedings before the Commission that preceded the federal court litigation, Barclays vigorously contested the factual and legal foundation of these allegations and argued that its activities were lawful.
The core of Barclays’ motion is that FERC lacks jurisdiction to pursue the alleged manipulation claims. In general, FERC oversees electricity cash markets, while the CFTC oversees futures markets. However, some market participants, and even the agencies themselves, dispute the scope of these jurisdictional boundaries.
Relying heavily on the D.C. Circuit’s 2013 decision in Hunter v. FERC, 711 F.3d 155 (D.C. Cir. 2013), Barclays argues that the CFTC, not FERC, has exclusive jurisdiction over the swap contracts at issue. Barclays also argues FERC lacks jurisdiction because the bank did not physically receive or deliver electricity through any of the contracts at issue, an “essential element” to FERC’s jurisdiction.
The traders separately argue that FERC may not bring manipulation claims against them in their individual capacities, as they are not “entities” within the meaning of the Federal Power Act.
Alternatively, if the court does not dismiss FERC’s claims, Barclays requested that the court transfer the matter to the Southern District of New York, because Barclays and its traders do not live in California and the alleged activity occurred at Barclays’ West Power Desk in New York City.
A hearing on Barclays’ motion to dismiss has been scheduled for April 24, 2014. Barclays has requested to stay proceedings until the court rules on the motion. A hearing on the stay request is scheduled for January 16, 2014.