DRW Investments Sues to Forestall CFTC Enforcement Action

DRW Investments LLC, a Chicago-based investment firm, filed a pre-emptive lawsuit against the Commodity Futures Trading Commission seeking a court’s finding that the company didn’t breach derivatives trading regulations.

DRW Investments and its principal, Donald R. Wilson, sued the CFTC today in federal court in Chicago, saying its case is a response to the agency’s “stated intention to bring an enforcement action.”

“The CFTC’s action would depend on an erroneous and legally untenable claim,” that DRW violated anti-manipulation provisions of the Commodity Exchange Act by placing orders at prices differing from those of similar, though not identical, over-the-counter swaps, DRW said in a statement.

At issue are interest-rate swap futures contracts traded on the Nasdaq OMX (NDAQ) Futures Exchange and cleared through the International Derivatives Clearinghouse from August 2010 through September 2011.

Wilson and the company, a unit of DRW Holdings LLC, alleged that when the trades were carried out, no regulation or rule made them illegal and an attempt by the agency to do so now would violate their constitutional right to fair notice of what activities would be considered market manipulation.

Steve Adamske, a CFTC spokesman, declined to comment on DRW’s lawsuit.

The case is DRW Investments LLC v. U.S. Commodity Futures Trading Commission, 13-cv-06630, U.S. District Court, Northern District of Illinois (Chicago).

To contact the reporters on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net; Silla Brush in Washington at sbrush@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Maura Reynolds at mreynolds34@bloomberg.net

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