Commission continues aggressive campaign against market manipulation

By: Travis Mitchell |

The Federal Energy Regulatory Commission on Wednesday proposed a $470 million fine against British bank Barclays as punishment for allegedly manipulating California energy markets from 2006 to 2008.

The Order also calls for $18 million in fines for four individual Barclays traders involved in the scandal, which FERC called a “highly coordinated and discussed” scheme to manipulate the western U.S. power market over 35 months. Total losses to market participants were pegged at nearly $140 million.

More specifically, the Order outlines that, “Barclays generally began by assembling substantial physical index positions in the opposite direction of its fixed-for-floating financial swap positions. Barclays flattened those physical index positions in the next-day fixed-price physical markets in a manner designed to move the daily index settlement up if it was buying and down if it was selling.”

The bank has 30 days to defend itself against the accusations and the penalty. If the penalty holds, it’s another huge financial blow for the bank, which was just recently fined $450 million for its involvement in the Libor interest rate setting scandal.

In a statement released Thursday, Barclays admitted no wrongdoing.

“We have cooperated fully with the FERC investigation, which relates to trading activity that occurred several years ago. We intend to vigorously defend this matter,” the bank said.

This is the latest push by FERC to crack down on energy market manipulation in California. Back in September the Commission launched an investigation into allegations that JPMorgan skimmed $80 million off inflated profits in the state. FERC has taken similar action against Deutsche Bank.