Statement of Chairman Timothy Massad in Support of the Proposed Amendment to the RTO-ISO Order

May 10, 2016

The proposal we have approved today would amend a 2013 CFTC order that exempted specified transactions of six independent system operators (ISOs) and regional transmission organizations (RTOs) from certain provisions of the Commodity Exchange Act (CEA). That order explicitly did not exempt ISOs and RTOs from the general CEA provisions that prohibit fraud and manipulation. If adopted, the proposed amendment would make clear that this exemption does not prohibit private rights of action for violations of the very same anti-fraud and anti-manipulation provisions that are explicitly reserved in the order.

Private rights of action have been instrumental in helping to protect market participants and deter bad actors. These actions can also augment the limited enforcement resources of the CFTC, and serve the public interest by allowing harmed parties to seek damages in instances where the Commission lacks the resources to do so on their behalf.

I appreciate the desire of businesses to have as little regulatory uncertainty as possible.

Indeed, providing certainty for market participants is something upon which we’re always striving to improve. But we also must make sure there is adequate recourse for those participants.

Moreover, private rights of action were called for by Congress under the CEA, to ensure wronged parties were provided with an appropriate remedy. Congress determined that the benefits to the public good outweigh any potential costs that may be incurred. Our job is to ensure that determination is properly implemented and enforced.

While some believe the Commission must have intended to exempt ISOs from private rights of action in the original order because it did not specifically preserve them, the proposal points out that it would be unusual for the Commission to have such an intention and say nothing about it, given that it expressly excluded general anti-fraud and anti-manipulation authority from the exemption. Regardless, we should decide the issue now on the merits. The proposal invites comment from all market participants and members of the public.

Finally, let me say that we are giving this proposal careful thought and consideration. We want to balance the value of regulatory certainty with the need to make sure that there is adequate recourse for market participants. We have heard from market participants in a number of venues, including a February meeting of the Energy and Environmental Markets Advisory Committee, and in other requests for comment. And we have tried to incorporate those concerns into the discussion of this proposal. This Notice of Proposed Amendment poses a number of specific questions that seek further detail with respect to the concerns we have heard from market participants. I encourage all interested parties to carefully consider these questions, and provide the Commission with your feedback.

I thank all those who have already provided us with the benefit of their perspective, as well as the CFTC staff and my fellow Commissioners for their work on this proposal. l look forward to hearing more as the comment period transpires.

Last Updated: May 10, 2016