Commodities, Futures & Derivatives

Disputes that begin with a position: a customer who says the trades in the account were never authorized or that the account was churned for commissions, a broker or introducing firm defending its handling of a margin call or a liquidation, a counterparty contesting a close-out valuation under an ISDA Master Agreement. They are heard in federal court, in NFA or exchange arbitration or in a CFTC reparations proceeding, and often alongside a regulatory inquiry into the same conduct. In each the first exhibit is the account agreement and the second is the tape.

The CFTC regulates futures, options on futures and most swaps, and its anti-fraud and anti-manipulation authority reaches spot commodity transactions, digital assets included. The National Futures Association registers and examines the industry and runs the arbitration forum most customer claims use, and the exchanges enforce their own rules through disciplinary committees. The SEC has jurisdiction over security-based swaps and over anything that is a security rather than a commodity, and the line between the two is litigated. We have represented clients in matters before the CFTC and the SEC, speaking for the party in front of the agency, not for the agency.

A trade the customer did not specifically authorize and had not given written discretionary authority to make. Under CFTC Regulation 166.2 the authorization must cover the contract, the quantity and the direction, or come from a written discretionary agreement signed in advance. The defenses are predictable: the recorded line shows consent, the trades were ratified when the customer received confirmations and said nothing within the days the account agreement allows, or the account was discretionary after all. Recourse lies in CFTC reparations, NFA arbitration or court, each within two years, and damages are generally the loss on the unauthorized positions measured from when the customer learned of them and could have closed them out.

Both. Under CFTC Regulation 166.5 a customer's pre-dispute arbitration agreement is enforceable only if the customer was told that signing it was not required to open the account and kept the right to choose the forum, so most customers can still elect NFA arbitration, CFTC reparations or court after the dispute arises. Disputes between registrants, by contrast, go to NFA or exchange arbitration on demand. An award from any of these forums is confirmed under the Federal Arbitration Act and collected like a judgment. Court brings broader discovery and a jury; arbitration brings industry arbitrators and speed; reparations brings a judge who knows the Act and an automatic sanction when an award goes unpaid. We settle the forum question in the first weeks and do not let it reopen.

With a preservation demand on day one for the recorded lines, which the broker need keep for only a year, then with the account agreement, any written discretionary authorization, and every confirmation and statement the customer received. From those we compute the turnover and commission-to-equity ratios, date the first moment the customer could have objected, and check the two-year clock against each possible forum. The theory of the case comes last, after the records have said what they say. Where the same conduct is under inquiry by the CFTC or an exchange, the civil file and the regulatory file are kept consistent, because they will be read together.

Yes. Our London and Dubai offices, run through partner firms, take the English-law end of a dispute, which matters because most ISDA Master Agreements choose New York or English law and the English courts hear a large share of close-out disputes. An arbitral award is enforceable in some 170 states under the New York Convention, while no treaty obliges a foreign court to honor an American judgment, which is one reason cross-border trading agreements so often choose arbitration. Where a counterparty or its assets sit in a jurisdiction we do not cover directly, we work through the firm's partner network of locally admitted counsel, with one Chicago partner accountable for the matter throughout.