The Efficient Deterrence of Manipulation in Future Markets.

Market manipulation -- the exercise of market power in a future market- is a felony under US commodity law, but recent court and regulatory decisions have made conviction of a manipulator problematic at best. Instead, regulators attempt to prevent manupulation through verious means. Deterrence is more efficient than prevention if manupulations can be detected ex post with high probability. This article examines a particular episode of attempted manupulation -- the Ferruzzi soybean episode of 1989-- to demonstrate how to test the exercise of market power in a commodity market.