Hey, Roger. Long time. Just popped over from the MIR thread and look who I find...
Re the legality of round trip trades, it seems clear that this market, like any other commodity trading market in the US, could use a little regulation to keep the traders honest. The CFTC regulates trading of other commodities - why not electricity?
But regulation of the trading marketplace is not the opposite of the deregulation of the power industry that lead to the creation of the IPPs. Deregulation of the industry is not what caused some traders and firms to engage in manipulative trading practices or sham transactions, but rather the lack of adequate rules governing the marketplace permitted unethical people to engage in those practices without fear of legal consequences. In any other security or commodity market in the US, these trades would be illegal, but one would not condemn the whole business of trading soybeans, for example, just because two traders engaged in sham trades.
Actually, though, as far as the round trip trades go, I see at least two angles for attaching civil or criminal liability to the bad actors. First, if they engaged in these transactions with no real business purpose other than to inflate revenues, then one might make a securities fraud case against them in that they attempted to deceive investors and creditors. Second, if the intent was to create the appearance of market activity at a certain price when there would otherwise be none, or trading would have occurred at a different price, and if this price was to be the basis for a supplier to fix an artificially high price on another power contract, then the buyer stuck with the inflated price might be able to claim they were defrauded.
Yes, there were outlaws in the Wild West. But don't give up and send everyone back East - hire more marshals.
Regards,
Bob |
