What is market manipulation? Lessons from Barclays and Powhatan

Abstract One crucial element of restructured electricity market regulation is the need to act against firms that engage in market manipulation. Unfortunately, manipulation law is poorly developed, in part because the Federal Energy Regulatory Commission (FERC) has its confused its different roles as a prosecutor and a court. Thus, at present, there seems to have been little progress on questions of what constitutes manipulation, what evidence is needed to show manipulation, and how manipulation laws can be best applied. Currently there appear to be two different types of manipulation cases. In the first, the theory of manipulation is clear, but the evidence to support that theory is weak. In the second, while the evidence is clear, it is uncertain whether the behavior in question constitutes “manipulation.” I suggest that the proper method for advancing manipulation law would be to remove from FERC its judicial role, and send these cases directly to the federal judiciary for determinations of liability.