Brattle is an industry leader in the detection, analysis, and refutation (or confirmation) of manipulative behavior in energy, commodity, financial, and securities markets. We provide analytical support related to internal and government investigations of suspicious behavior and provide associated expert testimony relating to the defense against, and support of, government enforcement actions and related civil litigation.
We advise and assist clients in the U.S. and EU with the implementation of compliance programs and development of internal surveillance systems. We also assist international government agencies in the establishment of market monitoring and enforcement regimes. Brattle’s energy and finance professionals combine to provide deep expertise in the regulatory and physical dimensions of commodities, securities, and financial markets, with a thorough understanding of the use of derivatives and other hedging practices used in broader portfolio management.
Our approach to the analysis of manipulation claims is based on a logical framework that is used to evaluate behavior in a manner that is consistent with the methods used in agency enforcement actions. This approach allows us to deconstruct trading portfolios to confirm or refute manipulative activity such as uneconomic trading and fraud, as well as to distinguish legitimate trading practices like hedging from speculative positions that could benefit from manipulation.
We are well-versed in the anti-manipulation rules of the Federal Energy Regulatory Commission (FERC), Commodity Futures Trading Commission (CFTC), Securities and Exchange Commission (SEC), and Federal Trade Commission (FTC), as well as equivalent rules in place in the European Union (REMIT, MAD). We have also worked on manipulation cases brought pursuant to state laws or actions by the U.S. Department of Justice.
L'Autorità per l'energia elettrica e il gas commissioned Brattle to assist it in developing a series of indicators to help identify market manipulation and/or market abuse in the Italian wholesale natural gas market. New legislation at the European level – notably the Regulation on Energy Market Integrity and Transparency (REMIT) as well as the Market Abuse Regulation (MAR) – have extended the duties of National Regulatory Authorities with respect to monitoring for such behavior.
A Brattle client requested an independent analysis concerning the suspected manipulation of precious metals spot, futures, and options contracts traded on Comex and Globex. Our analysis used data from the exchanges and the suspected firm to deconstruct its trading books. Trading instruments were separated into potential manipulation triggers and targets, such that the cause and effect of the behavior of concern could be evaluated analytically. Where this economic analysis suggested behavior of concern, contemporaneous email and instant messages were evaluated to confirm or refute manipulative intent.
Over the period of a decade The Brattle Group provided litigation support and expert testimony in four separate proceedings before the FERC seeking refunds from sellers in the California Power Exchange (PX), the California Independent System Operator (ISO), and the bilateral markets in the Pacific Northwest in the aftermath of the Energy Crisis of 2000-2001. Our clients included the largest utility companies in California, the California Attorney General, and the California Public Utilities Commission. Brattle experts offered testimony on manipulative gaming schemes, the exercise of market power, price discrimination, fraudulent misrepresentation in electricity and ancillary services sales, and the price impacts of such seller behavior on prices. Brattle testimony linked manipulative activities directly to violations of the PX and ISO tariffs and sellers’ market-based-rate authorizations and also explained why the resulting distorted prices in bilateral contracts were contrary to the public interest in the context of the Mobile-Sierra Doctrine.
Building an Effective Trade Surveillance System: A Framework-Based Approach using Guidance from Two Recent FERC White Papers
Published by The Brattle Group, Inc.
The whitepaper outlines a cost-effective, learning-driven approach for companies to develop in-house trade surveillance systems to analyze potentially manipulative behavior.