12 - Market Manipulation: Then and Now

Summary

This chapter describes the elements of market manipulation claims and the history of market manipulation in connection with the US markets for derivatives. From the beginning of futures trading in the United States in Chicago shortly before the Civil War, rampant market manipulation and other abusive trading practices have threatened commodity futures trading. Accordingly, since the passage of the Grain Futures Act of 1922 (GFA), the precursor to the CEA of 1936 and the first federal effort to oversee US derivative markets (as discussed in greater detail in Chapter 2), the “central focus” and “essential goal” of the federal regulation of futures and derivatives has been “the punishment and prevention of … manipulation,” which is more specifically referred to as “price manipulation” or “market-power manipulation.” Perhaps more colorfully, a former CFTC chairman has compared market-power manipulation to situations “where the 800-pound gorilla simply invades the chicken coop.”