Historically, one of the most common charges raised against the futures market has been that of market manipulation. It would seem that whenever the public perceives prices as being too high or too low, someone will allege that the price is the result of manipulation. Despite the ease and frequency with which critics have leveled such charges and the fact that federal law has prohibited "manipulation" for over 65 years, a satisfactory definition of manipulation has yet to emerge.
This Article offers a fresh approach to defining manipulation. Rather than asking a court to determine whether a price is "artificial" or "unreasonable," the proposed definition focuses on whether the conduct of the people involved is reasonable. More precisely, this Article defines manipulation as conduct that would be uneconomical or irrational, absent an effect on market price.
Part I of this Article briefly describes by way of background the operation and purpose of the commodity futures market, and Part II analyzes the legislative history of federal commodity trading laws. Part III describes and analyzes past approaches to defining manipulation that have proven inadequate. Part IV first critiques the various views regarding the purpose underlying the manipulation prohibition and then introduces an alternative view. Based on this view, this Article then proposes a definition of manipulation that focuses on the trader's conduct rather than on the resulting price and demonstrates how this definition can be used to identify common types of manipulation. The Article concludes that this new definition will prove more workable and thus will lead to more accurate identification of manipulative conduct in the commodity futures market than is possible using currently accepted definitions.
Wendy Collins Perdue, Manipulation of Futures Markets: Redefining the Offense, 56 Fordham L Rev. 345 (1988)