The CTRM Blog

The following article is published with permission from the authors. I post it here because it may be of interest to readers of the blog. You will recall that Amaranth, a large hedge fund, crashed a couple of years ago as a result of its natural gas positions causing some ramifications in markets. Brian Hunter, the “can do nothing wrong”, trader involved in this issue was held responsible for the problems and this article is about how the FERC have now found him to be in violation of Anti-Manipulation rules.

On January 22, 2010, a Federal Energy Regulatory Commission (FERC) administrative law judge ruled that Brian Hunter, a former natural gas trader at Amaranth Advisors LLC, violated the Commission’s Anti-Manipulation Rule. This case marks the first time that FERC has found market manipulation by a futures trader. Judge Carmen Cintron found that “Hunter intentionally manipulated the settlement price of the at-issue natural gas futures contracts. His trading was specifically designed to lower the NYMEX price in order to benefit his swap positions on other exchanges.” This initial decision is now subject to review by the full Commission.

The judge specifically found that Hunter’s conduct violated FERC’s Anti-Manipulation Rule, which prohibits (1) fraudulent or deceptive behavior (2) with the requisite scienter, (3) in connection with the purchase or sale of jurisdictional natural gas or electric energy.