A Regulatory Retreat: Energy Market Exemption from Private Anti-Manipulation Actions Under the Commodity Exchange Act

In order to facilitate greater reform in energy markets, Dodd-Frank granted the CFTC wide-ranging powers as part of the greater mandate given to the CFTC in relation to OTC-swaps and the daily derivatives trading activity in commodities futures and options markets. As a result, Dodd-Frank subjected electricity market transactions—which traditionally occur under the oversight of the Federal Energy Regulatory Commission in markets organized around independent system operators and regional transmission organizations—to the anti-manipulation prohibitions of the Commodity Exchange Act. Thus, differently from FERC’s regime, the post-Dodd-Frank statutory framework opened the way for enforcement of market discipline in electricity markets through a private right of action under Section 22 of the CEA. This development drew strong opposition from the industry, and also caused a conflict between courts and the CFTC in the interpretation of the relevant law. In October of 2016, the CFTC stepped back by issuing a final exemptive order to the participants of seven national energy markets, which constitute almost the entire U.S. wholesale electricity market. The withdrawal of the private right of action conflicts with the position previously advocated by the CFTC itself. It also raises questions about the CFTC’s use of its exemptive powers, as the removal of a statutory right through agency rulemaking may potentially be in conflict with the text and statutory purpose of the CEA as amended by Dodd-Frank. The exemption not only removes an important tool in enforcing market discipline, but also has the potential to undermine the reform efforts in the transition of U.S. energy markets to a smart grid. This Note will provide a history of the developments that have unfolded since the enactment of Dodd-Frank in relation to the availability of a private right of action under the CEA in energy markets. The Note also analyzes commonly raised arguments against the availability of a private right of action and presents the various counter-arguments

Dodd-Frank and the Spoofing Prohibition in Commodities Markets

The Dodd-Frank Act amended the Commodity Exchange Act and adopted an explicit prohibition regarding activity commonly known as spoofing in commodities markets. This Note argues that the spoofing prohibition is a necessary step towards improved market discipline and price integrity in the relevant commodities markets. It fills an important gap in the CEA in relation to an elusive form of price manipulation activity by providing an explicit statutory authority on which regulators and market operators may rely in policing suspect trading strategies falling under the spoofing umbrella. Congress’ explicit denouncement of spoofing as an illegal act has ramifications not only for traders, but also for brokers and market makers. In the past, when courts have considered the issue of secondary liability of brokers regarding manipulative activity of their customers in the context of wash sales, they have determined the CEA’s explicit prohibition of wash sales and the relatively easier identification of wash sales activity as important factors that may potentially increase the secondary liability risk of derivatives brokers. Applying the same analogy to spoofing, greater public awareness and the increasing visibility of spoofing activity (resulting from improvements in the monitoring systems of regulators and market operators) will provide strong incentives for market participants to adapt to changing norms. However, areas of concern, such as risk of selective enforcement and inconsistencies among the applicable market rules, will pose challenges in the spoofing prohibition’s implementation. Therefore, regulators must seek cooperation with relevant market operators to encourage structural reform and self-regulatory measures, such as implementation of appropriate structural safeguards into the trading infrastructure

Glacier motion estimation using SAR offset-tracking procedures

Two image-to-image patch offset techniques for estimating feature motion between satellite synthetic aperture radar (SAR) images are discussed. Intensity tracking, based on patch intensity cross-correlation optimization, and coherence tracking, based on patch coherence optimization, are used to estimate the movement of glacier surfaces between two SAR images in both slant-range and azimuth direction. The accuracy and application range of the two methods are examined in the case of the surge of Monacobreen in Northern Svalbard between 1992 and 1996. Offset-tracking procedures of SAR images are an alternative to differential SAR interferometry for the estimation of glacier motion when differential SAR interferometry is limited by loss of coherence, i.e., in the case of rapid and incoherent flow and of large acquisition time intervals between the two SAR images. In addition, an offset-tracking procedure in the azimuth direction may be combined with differential SAR interferometry in the slant-range direction in order to retrieve a two-dimensional displacement map when SAR data of only one orbit configuration are available

Using airborne laser altimetry to improve river flood extents delineated from SAR data

Flood extent maps derived from SAR images are a useful source of data for validating hydraulic models of river flood flow. The accuracy of such maps is reduced by a number of factors, including changes in returns from the water surface caused by different meteorological conditions and the presence of emergent vegetation. The paper describes how improved accuracy can be achieved by modifying an existing flood extent delineation algorithm to use airborne laser altimetry (LiDAR) as well as SAR data. The LiDAR data provide an additional constraint that waterline (land-water boundary) heights should vary smoothly along the flooded reach. The method was tested on a SAR image of a flood for which contemporaneous aerial photography existed, together with LiDAR data of the un-flooded reach. Waterline heights of the SAR flood extent conditioned on both SAR and LiDAR data matched the corresponding heights from the aerial photo waterline significantly more closely than those from the SAR flood extent conditioned only on SAR data

Extrapolation of Airborne Polarimetric and Interferometric SAR Data for Validation of Bio-Geo-Retrieval Algorithms for Future Spaceborne SAR Missions

Spaceborne SAR system concepts and mission design is often based on algorithms developed and the experience gathered from airborne SAR experiments and associated dedicated campaigns. However, airborne SAR systems have better performance parameters than their future space-borne counterparts as their design is not impacted by mass, power, and storage constraints. This paper describes a methodology to extrapolate spaceborne quality SAR image products from long wavelength airborne polarimetric SAR data which were acquired especially for the development and validation of bio/geo-retrieval algorithms in forested regions. For this purpose not only system (sensor) related parameters are altered, but also those relating to the propagation path (ionosphere) and to temporal decorrelation

Analysis Methods of Errors (Motion and Atmospheric) in Synthetic Aperture Radar (SAR) Images

A method to allow the analysis of the effects of motion and atmospheric errors in SAR images is here presented. The objective of the method is to allow the visualization of the effects of motion errors and atmospheric artefacts on the processed (focused) SAR image. The method is intended to allow the analysis of the interaction of motion and atmospheric errors with the adopted SAR processing procedure and motion compensation algorithms. In this article the analysis method has been applied and tested to a C-Band E-SAR (DLR airborne SAR system) data set where we see that the effects of linear and non-linear phase errors observed are in agreement with the theory