Although Ukraine itself is not under United States and European sanctions, because Ukraine’s economy has been largely rendered inoperative and with its shipping infrastructure virtually paralyzed by these events, a sizable portion of commodities produced in Ukraine, as well as those shipped from and through Ukraine, will not reach world commodity markets. Particularly, shortages of agricultural commodities are expected to occur in the Middle East.¹²

 As the United States embarks with other nations on implementing and enhancing these punishing sanctions, the Biden Administration will likely be looking for ways in which administrative agencies can take actions to dampen the impact that these sanctions and market volatility might have on U.S. consumers. Among other things, these exceptionally challenging circumstances could prompt the Biden Administration to consult with the CFTC about invoking its little known and rarely used emergency powers to impose futures trading restrictions, which can be used in conjunction with similar emergency actions by individual commodity exchanges (designated commodity markets “DCMs”).

The CFTC’s emergency powers, codified in Commodity Exchange Act (“CEA”) Section 8a(9) (7 U.S.C. § 12a(9))¹³ empowers the CFTC “to direct [a] registered entity, whenever it has reason to believe that an emergency exists, to take such action as in the Commission’s judgment is necessary to maintain or restore orderly trading in or liquidation of any futures contract[.]” This emergency authority includes, but is not limited to “the setting of temporary emergency margin levels on any futures contract, and the fixing of limits that may apply to a market position acquired in good faith prior to the effective date of the Commission’s action.” Other possible Commission actions would include “extending the expiration date of a futures contract; limiting trading to liquidation only; extending the time for making deliveries under the contract; and ordering the liquidation of open contracts.”¹⁴ In extreme circumstances, the CFTC could even temporarily suspend trading in a futures contract.¹⁵

 As for when the CFTC could assert these extensive authorities, the term “emergency” is defined in Section 8a(9) of the CEA as: “in addition to threatened or actual market manipulations and corners, any act of the United States or a foreign government affecting a commodity or any other major market disturbance which prevents the market from accurately reflecting the forces of supply and demand for such commodity.”¹⁶ This broad definition of emergency and the broad nature of the emergency authorization together give the CFTC (as well as DCMs) sweeping powers to intervene in futures markets during times of global crises, specifically those resulting from actions by the United States or a foreign government.

Although the CFTC’s emergency powers are undoubtedly broad, the Commission has exercised them sparingly, just four times in total – and all in the first decade of the Commission’s existence (between 1976 and 1980). The CFTC invoked these powers in relation to the potato market in 1976, the coffee market in 1977, the wheat market in 1979, and the grain markets in 1980.¹⁷ Former CFTC Chairman Gary Gensler refused to invoke emergency powers in 2012 amid a spike in domestic oil prices, despite pressure from a group of U.S. senators who blamed the price surge in part on excessive market speculation.¹⁸ The most recent time the CFTC invoked its emergency authority was in January 1980, when the Commission suspended “futures trading for two days for wheat, corn, oats, soybean meal, and soybean oil on four exchanges” following President Jimmy Carter’s announcement of the implementation of a grain embargo on the Soviet Union.¹⁹

Activation of these extraordinary emergency powers was also considered by the CFTC and DCMs during the COVID pandemic in 2020 and in the wake of the associated plummeting of WTI prices, but ultimately forgone when both the CFTC and DCMs concluded that the markets fulfilled their functions – i.e., the markets correctly priced commodity futures contracts under the existing market conditions.²⁰

If the CFTC were to revive its long-dormant emergency powers, in reaction to the Ukraine crisis, market participants and registered entities who claim damage from such Commission action would have the ability to challenge use of such powers in the federal courts of appeals thanks to an amendment to the original CEA provision. In March 1979, the CFTC turned to its emergency authority to order the Board of Trade of the City of Chicago “to suspend all trading in the March 1979 Wheat Futures Contract” for one day, citing “significant transportation and warehouse facility shortages [that] had caused a major market disturbance which prevented the market from accurately reflecting the forces of supply and demand.”²¹ The CFTC further noted that it had “reason to believe that there existed a threatened manipulation or corner in wheat as a consequence of this market disturbance and as a result of the combined long open positions maintained in [the March 1979 Wheat Futures Contract] by a small number of speculative traders.” The Board of Trade of the City of Chicago challenged the Commission’s order, with the U.S. Court of Appeals for the Seventh Circuit ultimately ruling that the CFTC’s emergency authority was not judicially reviewable.²²

 Congress, via the Futures Trading Act of 1982, undid the Seventh Circuit’s decision prospectively by amending Section 8a(9) of the CEA to provide for judicial review. The House Committee Report on the bill noted that the CFTC must have the “power to respond appropriately to a market emergency” without such power being circumscribed by litigation, but at the same time, “exercise of emergency powers should be subject to some review by the courts to avoid an abuse of administrative powers.”²³ The amendment sought to strike that balance by providing that the CFTC’s emergency actions are subject to review only in a federal appeals court, which “shall not enter a stay or order of mandamus unless it has determined, after notice and hearing before a panel of the court, that the agency action complained of was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”²⁴

 The CFTC has not indicated whether it intends to invoke its dormant emergency powers in the immediate future. Nevertheless, the rapidly evolving and unstable situation on the ground in Ukraine and Russia, as well as the escalating economic responses by the United States and other nations around the world, particularly in the form of financial sanctions that affect global commodity markets, could lead U.S. regulators, including those at the CFTC, to believe that temporary emergency actions may be necessary to address market disruptions. CFTC Chairman Rostin Behnam, speaking at a futures industry event in Florida last week, acknowledged that “[t]he ongoing tragedy in Ukraine has resulted in extreme volatility and, at the same time, record trading volume on global markets.”²⁵ Noting that uncertainty in derivatives markets is particularly acute in the current environment, Chairman Behnam announced that he directed CFTC staff to use “every tool the agency has to ensure that commodity markets continue to fairly and transparently serve the intended price discovery and risk management function.”²⁶

 If the CFTC does exercise its emergency powers as a last resort, it will likely coordinate closely with the DCMs. As former Commissioner Dan Berkovitz noted, “[i]n each of the four instances from 1976-1980 when the CFTC used its emergency authority, the CFTC worked with the affected exchanges prior to exercising this authority.”²⁷ Market operators and participants should be aware of this potential for market intervention and prepare themselves accordingly.

Finally, as with the COVID-19 pandemic, extraordinary commodity price volatility and shortages will also test global commodity traders’ business operations, as United States and global regulators prepare to face these unprecedented challenges. It is critical that commodity traders and market operators proactively implement robust business continuity and disaster recovery (“BCDR”) contingency plans to face these challenges. The CFTC, DCMs, and other regulators either require or strongly encourage market participants to implement such BCDR contingency plans.²⁸

1. For example, Ukraine is the largest supplier of sunflower oil, accounting for almost 50% of world supply. As the result of the war, virtually none of this commodity will be planted and shipped to consumers in 2022.
2. Here's how sanctions on Russia will actually cost you more. CNN Business
3. Wheat, energy prices spike amid fears of fresh sanctions. Financial Review
4. Surge in wheat prices expected to seed more suffering. AXIOS
5. Coal prices spike as Europe searches for alternatives to Russian energy. Quartz
6. London Metal Exchange to resume nickel trade. AP News
7. Surging Oil Futures Margins Are Latest Challenge Facing Traders. Bloomberg
8. Russia's rubble continues its slide as new curbs restrict access to foreign currency. New York Times
9. Moscow’s Stock Market to Remain Frozen for Third Week.The Wall Street Journal
10. US banks shun last Russian stock still trading in Hong Kong.Financial Times
11. Russia faces major disruptions to oil, commodities flows without SWIFT. Reuters
12. Russia-Ukraine War Adds Pressure to Already High Food Prices, Threatening Food Security for Millions. Wall Street Journal
13. 7 U.S. Code § 12a - Registration of commodity dealers and associated persons; regulation of registered entities. Legal Information Institute
14. CFTC Public Statements & Remarks, Statement of Commissioner Dan M. Berkovitz on Recent Trading in the WTI Futures Contract before the Energy and Environmental Markets Advisory Committee Meeting (May 7, 2020), (citing CEA § 8a(9); 7 U.S.C. § 12a(9); see also H.R. Conf. Rep. No. 93-1383, 93d Cong., 2d Sess. 36 (Sept. 27, 1974).
15. When Congress expanded the CFTC’s jurisdiction to regulate the swaps market, it did not specifically amend the Commission’s emergency powers to cover swaps. Nonetheless, CEA Section 2(d) could be read to confer such authority through a negative inference, as it carves out the agency’s authority under Section 8a (among many other provisions) from the statement that “[n]othing in this Act . . . governs or applies to a swap.”
16. Id.
17. Futures Trading Act of 1982 (Part 1)
18. Study: CFTC emergency powers don't extend to oil speculation curbs Chicago Tribune
19. CFTC History in the 1980s 
20. FIA COVID-19 and business continuity
21. The Board of Trade of the City of Chicago v. Commodity Futures Trading Commission, 605 F.2d 1016, 1018 (7th Cir. 1979).
22. Id.
23. Futures Trading Act of 1982 (Part 1)
24. H.R.5447 - Futures Trading Act of 1982
25. CFTC Chair Warns Of 'Unknowns' As Ukraine Crisis Continues. Law 360
26. Id.
27. CFTC Public Statements & Remarks, Statement of Commissioner Dan M. Berkovitz on Recent Trading in the WTI Futures Contract before the Energy and Environmental Markets Advisory Committee Meeting (May 7, 2020),
28. See COVID-19 and Business Continuity: Not U.S. Futures Regulators’ First Disaster, P. Malyshev, Futures and Derivatives Law Report, Volume 41, Issue 6, 2021 Thomson Reuters.

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