On November 18, 2021, the Federal Energy Regulatory Commission (FERC) Office of Enforcement issued its annual report on enforcement. The report details FERC’s enforcement priorities and summarizes enforcement actions taken over the previous year.
FERC’s 2021 priorities were largely the same as 2020, with a continued focus on market manipulation and market conduct. However, the Office of Enforcement followed through on its stated objective to vigorously enforce the rules. It settled eight cases totaling approximately $6.4 million, representing a tenfold increase in civil penalties and disgorgement from 2020. Additionally, a total of approximately $70 million in civil penalties and $10 million in disgorgement of unjust profits remains pending in federal district court. Demonstrating its focus on market manipulation and conduct, of the eight cases FERC settled, two were related to violations of anti-manipulation rules and three were related to ISO tariff violations. All four of the matters pending in federal district court are related to serious violations of FERC anti-manipulation and anti-fraud rules.
Reinforcing the importance of having a robust compliance program, six of the commission-approved settlements in 2021 include a compliance monitoring requirement. Additionally, the report highlights that the Office of Enforcement received 146 new self-reports from market participants, the vast majority of which were closed without action.
ViP: Eventus’’ Validus platform is designed to handle the complex requirements of energy market surveillance. The manipulation cases that FERC settled and those it continues to pursue in court include alleged attempts to manipulate prices, fraudulent round-trip trades (wash trades), uneconomic trading and manipulation of monthly indices. Validus offers a comprehensive suite of over 200 procedures that monitor for activities including spoofing, layering, wash trades, losses, reference price manipulation, off-market trades and market dominance.
With the ability to run Validus in real time or T+1, alerts are generated in a timely manner. Validus’ built-in investigative tools, including visualization of orders, trades and market data, enable a compliance analyst to quickly determine if an alert can be closed or may require escalation.
Validus users can also access an immutable audit log, which provides a record of how each alert is configured, any changes made to the alert parameters and the alert review. All of these elements can be exported in a report format in the event they need to be shared externally.
The detection and remediation of potential violations remains a cornerstone of an effective compliance program. With state-of-the-art platforms available to deliver cost-effective monitoring capabilities, the onus is on senior managers to ensure compliance and avoid finding their firm on the wrong side of FERC’s commitment to vigorous enforcement.
About Eventus Systems
Eventus Systems is a leading global provider of multi-asset class trade surveillance and market risk solutions. Its powerful, award-winning Validus platform is easy to deploy, customize and operate across equities, options, futures, foreign exchange (FX), fixed income and digital asset markets. Validus is proven in the most complex, high-volume and real-time environments of tier-1 banks, broker-dealers, futures commission merchants (FCMs), proprietary trading groups, market centers, buy-side institutions, energy and commodity trading firms, and regulators. The company’s rapidly growing client base relies on Validus and Eventus’ responsive support and product development teams to overcome its most pressing regulatory challenges. For more, visit www.eventus.com.