On January 2, approximately three years after the applicable deadline under the Dodd-Frank Act, the Federal Energy Regulatory Commission and Commodity Futures Trading Commission entered into two Memoranda of Understanding regarding high level procedures for: (1) resolving jurisdictional issues between the two agencies and (2) sharing information of mutual interest.
I. Jurisdictional MOU
The Jurisdictional MOU establishes high-level procedures for FERC and the CFTC to: (1) apply their respective authorities effectively and efficiently, (2) resolve conflicts concerning overlapping jurisdiction and (3) avoid conflicting or duplicative regulation. Accordingly, the two agencies agreed that:
1. They will notify and consult with staff of the other agency when considering an authorization or exemption with respect to a market participant that may fall within the jurisdiction of the other agency.
2. The notified agency will promptly advise the notifying agency whether it believes it has any interest in the matter.
3. On matters of mutual interest, the agencies will cooperate to develop an approach that meets both agencies’ regulatory concerns.
FERC and CFTC discord has escalated in recent years as FERC sought broad authority to issue civil penalties to individual futures market traders (the Brian Hunter case). In March of 2013, the U.S. Court of Appeals rejected FERC’s arguments that it had authority to levy a $30 million fine and clearly stated that the Commodity Exchange Act vested exclusive jurisdiction to the CFTC over futures markets.
II. The Information Sharing MOU
The Information Sharing MOU establishes procedures for the two agencies to share information and coordinate information requests in connection with market surveillance and investigations of manipulation, fraud and market power abuse. To enhance coordination and avoid duplicative information requests, the MOU provides that FERC will direct requests for information from designated contract markets (e.g., NYMEX), swap execution facilities (e.g., ICE Swap Trade), derivatives-clearing organizations or any other board of trade, exchange, derivatives market or swap data repository (i.e., entities generally under CFTC jurisdiction) to the CFTC. Likewise, the CFTC has agreed to direct requests for information from Regional Transmission Organizations, Independent System Operators, independent market monitors, the North American Electric Reliability Corporation, or interstate pipelines or storage facilities (i.e., entities generally under FERC jurisdiction) to FERC. Both agencies agreed to take all steps necessary to promptly obtain and furnish responsive information to such requests, subject to confidentiality requirements. If implemented as envisioned, the Information Sharing MOU should improve the efficiency of investigations for agencies and market participants alike and improve the agencies’ information gathering abilities with respect to market participants’ activities in related markets outside each agency’s traditional purview.
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