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In the fall of 2006, Amaranth Advisors LLC (“Amaranth”), a hedge fund that had heavily invested in natural gas futures, collapsed. A Senate investigation would later conclude that Amaranth, in the months leading up to its demise, had taken positions in natural gas futures and swaps so massive that its trading directly affected domestic natural gas prices and price volatility. See Staff Report of S. Permanent Subcomm. on Investigations, Comm, on Homeland Security and Governmental Affairs, 110th Cong., Excessive Speculation in the Natural Gas Market 6 (2007) (“Senate Report”). Plaintiffs-Appellants, traders who had bought or sold natural gas futures during these same months, filed a complaint in the United States District Court for the Southern District of New York alleging that Amaranth had manipulated the price of natural gas futures in violation of the Commodities Exchange Act (“CEA”), 7 U.S.C. § 1 et seq. Plaintiffs-Appellants also alleged that Defendants-Appellees J.P. Morgan Chase & Co., J.P. Morgan Chase Bank, Inc., and J.P. Morgan Futures, Inc. (“J.P. Futures”) (collectively, “J.P. Morgan”) had aided and abetted Amaranth’s manipulation of natural gas futures through J.P. Futures’s services as Amaranth’s futures commission merchant and clearing broker. The district court (Scheindlin, J.), in October 6, 2008 and April 27, 2009 orders, concluded that both Plaintiffs-Appellants’ complaint and amended complaint failed to state claims against J.P. Morgan.
Plaintiffs-Appellants argue on appeal that the district court did not apply the correct standard for evaluating the sufficiency of their amended complaint and likewise failed to recognize the amended complaint’s well-pleaded allegations that J.P. Futures aided and abetted Amaranth’s manipulation within the meaning of Section 22 of the CEA, 7 U.S.C. § 25(a). We conclude that the district court did not err in concluding that Plaintiffs-Appellants’ amended complaint failed to state a claim against J.P. Futures. Because we conclude that this is so even under the pleading standards that Plaintiffs-Appellants argue should apply, we do not decide
BACKGROUND
1. Commodity Futures Trading
The CEA prohibits manipulation of the price of any commodity or commodity future. See 7 U.S.C. §§ 9(1), 13(a)(2). While the CEA itself does not define the term, a court will find manipulation where “(1) Defendants possessed an ability to influence market prices; (2) an artificial price existed; (3) Defendants caused the artificial prices; and (4) Defendants specifically intended to cause the artificial price.” Hershey v. Energy Transfer Partners, L.P., 610 F.3d 239, 247 (5th Cir. 2010).
A. NYMEX Natural Gas Futures
NYMEX is a futures and options exchange based in New York City. N.Y. Mercantile Exch. v. IntercontinentalExchange, Inc., 497 F.3d 109, 110 (2d Cir.2007). We have previously described the basic features of commodity futures trading:
A commodities futures contract is an executory contract for the sale of a commodity executed at a specific point in time with delivery of the commodity postponed to a future date. Every commodities futures contract has a seller and a buyer. The seller, called a “short,” agrees for a price, fixed at the time of contract, to deliver a specified quantity and grade of an identified commodity at a date in the future. The buyer, or “long,” agrees to accept delivery at that future date at the price fixed in the contract. It is the rare case when buyers and sellers settle their obligations under futures contracts by actually delivering the commodity. Rather, they routinely take a short or long position in order to speculate on the future price of the commodity. Then, sometime before delivery is due, they offset or liquidate their positions by entering the market again and purchasing an equal number of opposite contracts, ie., a short buys long, a long buys short. In*174 this way their obligations under the original liquidating contracts offset each other. The difference in price between the original contract and the offsetting contract determines the amount of money made or lost.
Strobl v. N.Y. Mercantile Exch., 768 F.2d 22, 24 (2d Cir.1985).
One type of futures contract traded on NYMEX is for the delivery of natural gas. In its standard form, this contract obligates the buyer to purchase 10,000 MMBtu
NYMEX is a designated contract market, or “DCM.” As a DCM, NYMEX may offer options and futures trading for any type of commodity, but is subject to extensive oversight from the Commodity Futures Trading Commission (“CFTC”). See 7 U.S.C. §§ 6(a)(1), 7. Among other things, NYMEX must maintain an internal monitoring and compliance program that meets statutory criteria listed in the CEA. See id. § 7. One of these criteria is that NYMEX establish position limits and accountability levels for each type of contract that it offers for trading. See id. § 7(d)(5). A “position limit” is a cap on the number of contracts that a trader may hold or control for a particular option or future at a particular time, with exceptions provided for traders engaged in bona fide hedging. See id. § 6a(a)(2)(A), (c)(1). An “accountability level” provides that once a trader holds or controls a certain number of contracts for a particular option or future she must provide information about that position upon request by the exchange and, if the exchange so orders, stop increasing her position. At the time of the events alleged in the amended complaint, NYMEX had set a position limit of 1,000 contracts, net short or net long, for any natural gas future, applicable during the last three days of trading. NYMEX had also set corresponding accountability limits, which varied in size based on the trader’s capitalization and applied at all times the future was traded.
All trades on NYMEX must go through the exchange’s clearinghouse. To finalize, or “clear,” a trade, traders must transact with a NYMEX clearing member — a firm approved as a member of the clearinghouse. The seller’s clearing firm will sell the contract to the clearinghouse, which then sells the contract to the buyer’s clearing firm. Through this act of simultaneously buying and selling the contract, the clearinghouse guarantees both sides of the trade and ensures that neither buyer nor seller is exposed to any counterparty credit risk. The clearing firms, in turn, guarantee their clients’ performance to the clearinghouse.
To protect itself from risk of nonpayment, the NYMEX clearinghouse requires that its members deposit margin sufficient to cover any potential short-term losses on their clients’ open positions. At the end of each trading day, the clearinghouse examines the change in value to these positions and determines whether the firm must post additional margin (generally the case if value has decreased) or receives payment on margin (generally the case if value has increased). This process is called “marking-to-market.” See N.Y. Mercan
In addition to clearing members, traders on NYMEX also interact with futures commissions merchants, or “FCMs.” “An FCM is the commodity market’s equivalent of a securities brokerage house, soliciting and accepting orders for futures contracts and accepting funds or extending credit in connection therewith.” First Am. Discount Corp. v. CFTC, 222 F.3d 1008, 1010 (D.C.Cir.2000); see also 7 U.S.C. § la(28). FCMs must register with the CFTC, see id. § 6d(a)(l), and are subject to numerous regulatory requirements. A firm may be both a clearing member and an FCM. Such dual status would enable it to both accept orders from clients and clear any resulting trades.
B. ICE Natural Gas Swaps
ICE is an electronic commodity exchange based in Atlanta, Georgia. At the time of the events alleged in the amended complaint, ICE offered trading in natural gas swaps.
Since the settlement price of an ICE Henry Hub natural gas swap was pegged to the final settlement price of the corresponding NYMEX natural gas future, the two instruments were functionally identical for risk management purposes. Indeed, arbitrageurs ensured that their prices moved in virtual lockstep with one another. Whether a trader decided to transact in ICE swaps or in NYMEX futures often depended on factors such as which market had greater liquidity.
An important difference between the two instruments, however, was that ICE did not face the same level of regulatory oversight as did NYMEX. At the time of the events alleged in the amended complaint, ICE qualified as an “exempt commercial market,” or “ECM,” under the CEA.
At the time of the events alleged in the amended complaint, ICE did not have a central clearinghouse.
2. Factual Background
The following facts are taken from the amended complaint, the allegations of which we accept as true, as well as from other materials referenced in the amended complaint. See, e.g., ONY, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490, 496 (2d Cir.2013).
A. Amaranth
Amaranth was a multi-strategy hedge fund based in Greenwich, Connecticut. Founded in 2000, Amaranth initially pursued an investment strategy that did not particularly focus on energy trading. This changed over the next half-decade, however, and by 2005 energy trading consumed over thirty percent of Amaranth’s capital. Amaranth profited from this focus on energy when, in late 2005, Hurricanes Katrina and Rita disrupted domestic natural gas distribution. The resultant spike in prices produced returns on Amaranth’s investments so large that energy trading would ultimately account for 98% of the fund’s 2005 performance. By the beginning of 2006, Amaranth managed over $8 billion in assets and employed over 400 people.
Amaranth continued to focus on energy trading in 2006. Among other things, it began to acquire large “spread” positions in NYMEX natural gas futures.
Amaranth started to build up short positions for the March 2006, April 2006, and November 2006 NYMEX natural gas futures, while at the same time acquiring a long position for the January 2007 future. The sizes of these positions were exceptional. Most traders consider control of only a few hundred contracts to be a substantial position; a position of 10,000 NY-MEX natural gas futures contracts, meanwhile, will produce $1,000,000 in profit or loss for every cent of price change. Amaranth, however, soon acquired positions of over 40,000 March 2006 and 27,000 April 2006 contracts. These positions also represented a substantial share of the market. By February, Amaranth controlled over half of the open interest on NYMEX November 2006 natural gas futures contracts, and held a similar percentage of January 2007 contracts.
While Amaranth was building its spread positions during the first half of 2006, it also engaged in several unusual transac
Amaranth engaged in these “slamming the close” trades for the March 2006, April 2006, and May 2006 NYMEX natural gas futures. For example, on the March 2006 future’s final trading day, Amaranth acquired a long position in the future of over 3,000 contracts. It then sold off this position during the future’s final settlement period, lowering the future’s final price by $0.29 and realizing a gain for its short positions of over $29 million. Amaranth engaged in similar conduct the next two months, building up a large long position, selling it off during the final settlement period, and profiting by virtue of short positions on ICE as well as in other NY-MEX natural gas futures also suppressed in price by the trades. Subsequent investigations would reveal that Amaranth traders discussed “smashing” the settlement price of these NYMEX futures and directed floor brokers not to sell the contracts until the final minutes of trading.
In conducting these trades, Amaranth violated NYMEX position limits and accountability levels, which prompted investigations from both NYMEX and the CFTC. NYMEX also sought to limit Amaranth’s trading for the June 2006 future, even contacting J.P. Futures, Amaranth’s clearing broker, in May to remind it that Amaranth needed to remain below applicable position limits. Amaranth failed to heed these warnings, and on June 1 it appeared on a list of traders exceeding applicable accountability levels. Nevertheless, NY-MEX’s initial response to Amaranth’s having again exceeded accountability levels was to recommend their temporary increase. Then in early August, NYMEX informed Amaranth that it should reduce its positions in the September 2006 natural gas future. Amaranth responded by shifting its positions in September and October natural gas futures to the corresponding swaps on ICE. It subsequently increased the size of those positions.
By early September 2006, Amaranth had a total open position in natural gas futures and swaps of 594,455 contracts. The fund’s ever-increasing positions kept the spreads between winter and summer natural gas prices artificially high. Indeed, energy traders would subsequently describe the spread between winter and summer prices as “clearly out-of-whack” and “ridiculous.” The Senate Permanent Subcommittee on Investigations would later conclude that Amaranth “dominated” the domestic natural gas market in 2006, and “had a direct effect on U.S. natural gas prices and increased price volatility in the natural gas market.” This investigation would reveal that Amaranth traders discussed using the fund’s large positions to, among other things, “push” and “widen” spreads.
By September 2006, however, the market for natural gas moved in ways that disrupted Amaranth’s positions. As the winter months approached, it became clearer that the price of natural gas would not rise considerably; the winter/summer price spreads in which Amaranth had invested consequently began to fall. Amaranth, faced with ballooning margin requirements, struggled to find the capital or
On July 25, 2007, the CFTC filed a complaint against Amaranth and its head energy trader, Brian Hunter, alleging that they “intentionally and unlawfully attempted to manipulate the price of natural gas futures contracts on the New York Mercantile Exchange (‘NYMEX’) on February 24 and April 26, 2006 ... and that Amaranth Advisors L.L.C. made material misrepresentations to NYMEX in violation of Section 9(a)(4) of the [CEA].” CFTC v. Amaranth Advisors L.L.C., No. 07-cv-6682, 2009 WL 3270829, at =:=1 (S.D.N.Y. Aug. 12, 2009). The defendants settled with the CFTC for a civil penalty of $7.5 million. Id. at *3. On July 26, 2007, the Federal Energy Regulatory Commission (“FERC”) commenced an administrative proceeding against Amaranth for civil penalties and disgorgement of profits. See CFTC v. Amaranth Advisors, LLC, 523 F.Supp.2d 328, 331 (S.D.N.Y.2007). Amaranth likewise settled for a civil penalty of $7.5 million.
B. J.P. Futures
Throughout the class period, J.P. Futures served as Amaranth’s FCM and clearing firm. This meant, among other things, that J.P. Futures processed and settled Amaranth’s trades on both NY-MEX and ICE.
As Amaranth’s clearing broker, J.P. Futures “marked to market” Amaranth’s positions on a daily basis in order to determine if Amaranth needed to deposit additional margin. This, along with J.P. Futures’s other roles as a clearing broker, meant that it knew of Amaranth’s positions and trading activity. As the clearing broker, J.P. Futures also knew when Amaranth violated NYMEX position limits or exceeded NYMEX accountability levels. Indeed, NYMEX contacted J.P. Futures directly in May 2006 to warn it about Amaranth’s position in the June 2006 NYMEX natural gas future. Additionally, J.P. Futures knew of the positions Amaranth took in connection with its “slamming the close” trades. It similarly knew about the NYMEX and CFTC investigations into Amaranth’s trading.
Throughout the class period, J.P. Futures continued to service all of Amaranth’s trades, including those that put Amaranth’s positions above applicable NY-MEX position limits and accountability levels. On one occasion in late May 2006, J.P. Futures bypassed its own internal position limits for natural gas futures in order to clear a series of large trading trans
3. Procedural History
On July 12, 2007, Plaintiffs-Appellants filed a complaint on behalf of all traders who purchased and sold NYMEX natural gas futures contracts between February 16 and September 28, 2006.
Defendants filed a motion to dismiss. In an October 6, 2008 opinion, the district court granted the motion in part and denied it in part. See In re Amaranth Natural Gas Commodities Litig. (‘Amaranth I”), 587 F.Supp.2d 513 (S.D.N.Y. 2008). The district court determined as an initial matter that Plaintiffs-Appellants’ allegations of manipulation were subject to the heightened pleading standards of Federal Rule of Civil Procedure 9(b). Id. at 535-36. Applying this standard, the court found that the complaint’s “slamming the close” allegations, but not its allegations about Amaranth’s exceptionally large open positions, raised a sufficient inference of scienter to state a claim for manipulation under the CEA. Id. at 539-41. Turning to the complaint’s aiding and abetting claim against J.P. Morgan, the court determined that the complaint raised “a strong inference that [J.P. Futures] had knowledge of the manipulations and intended their success.” Id. at 544.
Plaintiffs-Appellants’ class action claims against Amaranth and the floor broker defendants were eventually certified, and in December 2011 the parties reached a settlement agreement dismissing the claims for $77.1 million. See In re Amaranth Natural Gas Commodities Litig., No. 07-ev-6377, 2012 WL 2149094, at *1 (S.D.N.Y. June 11, 2012). In April 2012, the district court entered final judgments dismissing all remaining claims against the remaining defendants, including J.P. Futures. Plaintiffs-Appellants filed a timely notice of appeal.
DISCUSSION
1. Standard of Review
We review de novo a district court’s dismissal of a complaint for failure to state a claim. Fezzani v. Bear, Stearns & Co. Inc., 716 F.3d 18, 22 (2d Cir.2013). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This standard requires that the complaint allege “more than a sheer possibility that a defendant has acted unlawfully” and more than “facts that are merely consistent with a defendant’s liability.” Id. (internal quotation marks omitted). Applying this standard is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679, 129 S.Ct. 1937.
The district court concluded below that Plaintiffs-Appellants’ amended complaint was subject to the heightened pleading standard of Rule 9(b). See Amaranth II, 612 F.Supp.2d at 382; Amaranth I, 587 F.Supp.2d at 535. It based its conclusion on this Circuit’s statement in ATSI Communications, Inc. v. Shaar Fund, Ltd., a securities manipulation case, that “ ‘a claim for market manipulation is a claim for fraud.’ ” Amaranth I, 587 F.Supp.2d at 535 (quoting ATSI, 493 F.3d 87, 101 (2d Cir. 2007)). Plaintiffs-Appellants argue that it
2. Aiding and Abetting under the CEA
Section 22 of the CEA provides a private right of action against “[a]ny person (other than a registered entity or registered futures association) who violates this chapter or who willfully aids, abets, counsels, induces, or procures the commission of a violation of this chapter.” 7 U.S.C. § 25(a)(1). This language tracks that of 7 U.S.C. § 13c(a), which establishes aiding and abetting liability generally under the CEA.
Accordingly, both the CFTC and courts have determined that the standard for aiding and abetting liability under the CEA is the same as that for aiding and abetting under federal criminal law. The CFTC has held, drawing from Judge Learned Hand’s classic formulation of criminal aiding and abetting liability in United States v. Peoni, 100 F.2d 401, 402 (2d Cir.1938), that “proof of a specific unlawful intent to further the underlying violation is necessary before one can be found liable for aiding and abetting a violation of the [CEA].” In re Richardson Secs., CFTC No. 78-10, 1981 WL 26081, at *5. The Seventh Circuit has likewise noted that “[t]he elements that a plaintiff must allege to state a claim for aiding and abetting
This Circuit has yet to articulate a precise standard for aiding and abetting liability under the CEA. We agree that Section 22 should be interpreted consistently with the criminal law, and that a complaint therefore states a claim for aiding and abetting under 7 U.S.C. § 25 when it plausibly alleges conduct that would constitute aiding and abetting under 18 U.S.C. § 2. We have not typically evaluated criminal aiding and abetting under a three-part test, however, but have instead continued to follow Judge Hand’s statement in Peoni that aiding and abetting requires the defendant to “in some sort associate himself with the venture, that he participate in it as in something that he wishes to bring about, that he seek by his action to make it succeed.” 100 F.2d at 402; see also United States v. Frampton, 382 F.3d 213, 222 (2d Cir.2004) (citing Peoni as the “traditional understanding of the law of aiding and abetting”). We do not understand this traditional articulation of the standard to differ, in substance, from the standard employed by the Seventh and Third Circuits.
We recently reaffirmed Peoni’s continued validity in SEC v. Apuzzo, 689 F.3d 204 (2d Cir.2012), which found the standard helpful for determining aiding and abetting liability under the Securities Exchange Act.
Apuzzo is also instructive on how this standard works in the context of Rule 12(b)(6) determinations. The Apuzzo panel observed that a nexus exists between a defendant’s knowledge of, intent to further, and assistance given to a primary violation. Id. at 214-15. That is to say, a complaint with weak allegations about a defendant’s affirmative assistance may still state a claim for aiding and abetting if its allegations about the defendant’s knowledge and intent are particularly strong, and vice versa. Though the panel discussed this nexus within the context of the three discrete elements of aiding and abetting liability under Section 20(e), it also suggested that the approach equally applies to a standard like Peoni’s. See id. at 215 (“[I]f a jury were convinced that the defendant had a high degree of actual knowledge ... they would be well justified in concluding that the defendant’s actions, which perhaps could be viewed innocently in some contexts, were taken with the goal of helping the fraud succeed.”). We agree. Such an evaluation of the different aspects of a defendant’s asserted relationship to the primary violator, consisting of the alleged aider and abettor’s knowledge of the primary violation, his intent to further it, and the actions supposedly undertaken to assist it, is inherent in determining whether the defendant “in some sort assoeiate[d] himself with the venture, that he participate[d] in it as in something that he wishe[d] to bring about, that he [sought] by his action to make it succeed.” Peoni, 100 F.2d at 402.
Thus, in sum, the standard for aiding and abetting liability under 7 U.S.C. § 25 is the same as for criminal aiding and abetting under 18 U.S.C. § 2. The best articulation of this standard is that found in Peoni. Inherent in Peoni’s articulation is a relationship between a defendant’s knowledge, intent, and the nature of assistance given. Accordingly, in evaluating a complaint alleging the aiding and abetting of a violation of the CEA, allegations about the defendant’s knowledge, intent, and actions should not be evalu