Thursday, November 21, 2013

A Legal History of Market Manipulation

Jerry W. Markham has published Law Enforcement and the History of Financial Market Manipulation with M. E. Sharpe.  Here is the press’s description:
Price manipulation techniques are intentionally difficult to understand, detect, and prove, and the rise of high-frequency trading has further complicated the task. This book maps the issues and traces the U.S. government's efforts to properly regulate, monitor, and prevent financial speculation and price manipulation in various markets. The coverage begins with the period from the late nineteenth century to the first congressional efforts at regulation in the 1930s and continues on to the present, with a full chapter on the legal and financial aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

All the U.S. financial institutions involved with such regulation--the most prominent of which are the Securities and Exchange Commission created in 1934 and the Commodity Futures Trading Commission created in 1974--are discussed here in detail. Also covered are major financial imbroglios such as the Enron scandal and the ill-timed speculation in natural gas prices that brought down the Amaranth Advisors hedge fund. The last chapter discusses the difficulty of initiating successful prosecutions of financial fraud and price manipulation and proposes a new approach to preventing manipulative practices.
TOC after the jump.

List of Abbreviations

1. Manipulation: Some History
1:1 Manipulation: A Primer
1:2 Ancient History
1:3 Manipulation Arrives in America
1:4 Commodity Futures Markets
1:5 Manipulation Enters the Twentieth Century
1:6 Governmental Reponses to Manipulation
1:7 Speculation Continues
1:8 The Federal Trade Commission Report
1:9 The Futures Trading Act of 1921
1:10 The Grain Futures Act of 1922
1:11 The Law of Stock Market Manipulation

2. Market Manipulation and the New Deal Legislation
2:1 The Grain Futures Act
2:2 The Roaring Twenties
2:3 The New Deal
2:4 The Commodity Exchange Act of 1936
2:5 Implementing the Securities Exchange Act of 1934
2:6 Implementing the Commodity Exchange Act
2:7 World War II and the Commodity Markets

3. Postwar Manipulation and Speculation
3:1 The SEC Adopts Rule 10b-5
3:2 Postwar Speculation
3:3 Postwar Commodity Manipulation Cases
3:4 The Korean War and Commodity Price Concerns
3:5 The Stock Market Boom: The 1950s
3:6 More CEA Manipulation Cases
3:7 SEC Manipulation Cases: The 1960s
3:8 CEA Manipulation Cases: The 1960s

4. Manipulation of Commodity Prices in a Time of Inflation
4:1 Crude Oil Price Concerns
4:2 The Commodity Exchange Authority Falters
4:3 The Potato Default
4:4 Coffee Emergency
4:5 Speculative Limits and the Soybean Affair
4:6 The March 1979 Wheat Emergency
4:7 Feeder Cattle
4:8 The Silver Crisis
4:9 The CFTC Defines Manipulation
4:10 Energy Futures Arrive
4:11 Other Rigged Trading Issues
4:12 The Orange Juice "Attempted Manipulation"
4:13 The Ferruzzi Affair
4:14 The Sumitomo Affair
4:15 Academic Views

5. Manipulation Setbacks Under the Federal Securities Laws
5:1 Rule 10b-5 Under Attack
5:2 The Birnbaum Doctrine
5:3 The Scienter Requirement
5:4 Manipulation as Fraud
5:5 The Materiality Requirement
5:6 The Reliance Element
5:7 Causation Elements
5:8 Secondary Liability
5:9 Extraterritorial Limitations
5:10 Insider Trading Limitations
5:11 Derivative and Stock Market Manipulation Concerns
5:12 Treasury Securities Manipulation Concerns
5:13 Pump-and-Dump Schemes
5:14 The Private Securities Litigation Reform Act of 1995
5:15 More Definitional Problems

6. The Battle over OTC Derivatives
6:1 The Swaps and OTC Derivatives Markets Are Born
6:2 The CFMA and the Enron Loophole
6:3 The CFTC Shifts Strategies
6:4 The Justice Department Intervenes
6:5 The BP Case
6:6 False Reports to Exchanges
6:7 Rigged Trade Manipulations and Section 4(c)
6:8 FERC Enters the Manipulation Arena
6:9 The Federal Trade Commission Enters the Manipulation Arena
6:10 Closing the Enron Loophole

7. The Dodd-Frank Act
7:1 The Credit Default Swaps Market
7:2 The SEC's Antimanipulation Role After Dodd-Frank
7:3 High-Frequency Trading
7:4 New CFTC Antimanipulation Powers Under Dodd-Frank
7:5 "Spoofing"
7:6 The CFTC Becomes an Antispeculation Agency
7:7 Margin Requirements and Manipulation
7:8 Position Limits
7:9 Short Selling and Other Trading Restrictions
7:10 Proprietary Trading and the Volcker Rule
7:11 Oil Prices Again

8. Challenges for the New Manipulation Standards
8:1 Statutory Interpretation of Borrowed Language
8:2 The Scienter Issue
8:3 The Open-Market Versus Closed-Market Debate
8:4 Artificial Price and Attempted Manipulation
8:5 Manipulation by False Reports
8:6 Minimanipulations
8:7 Surveillance by Computers
8:8 Populism Does Not Make for Effective Regulation
8:9 Conclusion