Alert March 22, 2011

CFTC Terminates Prior Proposed Rulemaking and Issues Proposed Interpretation of Prohibition on Disruptive Trading Practices

On March 18, 2011, the CFTC terminated its proposed rulemaking regarding the prohibitions on disruptive trading practices in new Section 4c(a)(5) of the Commodity Exchange Act added by the Dodd-Frank Act and issued a proposed interpretation of those prohibitions that reflects comments received on the earlier proposal.  Section 4c(a)(5) makes it “unlawful for any person to engage in any trading, practice, or conduct on or subject to the rules of a registered entity that— (A) [v]iolates bids or offers; (B) [d]emonstrates intentional or reckless disregard for the orderly execution of transactions during the closing period; or (C) [i]s, is of the character of, or is commonly known to the trade as, ‘spoofing’ (bidding or offering with the intent to cancel the bid or offer before execution).”  Section 4c(a)(5) becomes effective on July 16, 2011.  Comments on the proposed interpretation are due by May 17, 2011.