2018 Petition to CFTC To Suspend Exemption to PJM regarding Financial Transmission Rights (FTRs)
PJM's incompetent mishandling of the Greenhat FTR scandal shows that the CFTC should revoke its exemption
By Tyson Slocum
A crisis involving fraud and default in PJM’s FTR market threatens to stick end users―including the 65 million households in PJM―with as much as $180 million in default-related costs. The fraud was easily preventable, but PJM’s lack of effective oversight, combined with FERC’s failure to directly regulate key aspects of the market, have now exposed consumers to financial harm.
The FTR fraud was committed by Greenhat, which was run by two former JP Morgan traders who played a central role in a FERC settlement for the largest electricity market manipulation case since Enron. You might ask: How did two traders well known to FERC for their role in one market manipulation scheme manage to do it again? Because FERC doesn’t directly regulate the FTR market: FTR traders are not required to obtain approval to trade from FERC subject to public notice and comment; and FERC has no regulatory authority to sanction the ability of individual traders. Instead, FERC delegates sweeping authorities to PJM and the other RTOs.
The recent fraud and default crisis has revealed that PJM failed to abide by the terms laid out in the exemption. Public Citizen therefore formally requests that the CFTC suspend the exemption it granted PJM, and regulate FTRs as swaps in PJM under the Commodity Exchange Act.
Read the request here: GiancarloFTR