Court Again Rejects A CFTC Manipulation Claim

Introduction: On November 30, 2018, the Southern District of New York issued an opinion reaffirming the long-standing rule that traders cannot be found liable for illegal market manipulation when their trading was motivated by a good-faith economic analysis and reflected a bona fide interest in transacting on the terms submitted to the market, or where their trading did not create an "artificial" price. The court summarized the case by stating, "It is not illegal to be smarter than your counterparties in a swap transaction, nor is it improper to understand a financial product better than the people who invented the product."¹

Background: This decision arises out of the Commodity Futures Trading Commission's (CFTC) long-running action against Donald R. Wilson and his firm, DRW Investments, LLC (together, DRW).² The CFTC alleged that DRW manipulated and attempted to manipulate the price of the IDEX Three-Month Interest Rate Swap Futures Contract (the Three-Month