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CFTC Fines J.P. Morgan $200 Million for Trading Surveillance Failures

2024-05-24 Brokersview

On 23 May 2024, the Commodity Futures Trading Commission (CFTC) issued a concurrent order filing and settling charges against J.P. Morgan Securities LLC, a registered futures commission merchant and swaps dealer, for failing to exercise due diligence in overseeing its operations as a CFTC registrant, resulting in the failure of its surveillance systems to capture billions of orders.

 

The order requires J.P. Morgan to pay a $200 million civil monetary penalty (CMP), cease and desist from further violations of the CFTC’s supervision requirements, and comply with conditions and undertakings specified in the order. The order provides the CMP obligation will be offset by a total of $100 million of any payment made pursuant to the resolution with JPMorgan Chase Bank, N.A. concerning surveillance gaps by the Office of the Comptroller of the Currency dated March 14, 2024, and the resolution with JPMorgan Chase & Co. concerning surveillance gaps by the Board of Governors of the Federal Reserve System dated March 8, 2024.

 

“Today’s resolution includes a significant penalty, certain factual admissions, and the appointment of a consultant to ensure remediation,” said Director of Enforcement Ian McGinley. “We hope it sends a clear message that CFTC registrants must take appropriate steps to ensure, through testing and other means, that complete trade and order data direct from exchanges are being ingested into trade surveillance systems and that orders are being surveilled.”

 

According to the order, in 2021, in the course of onboarding a new trading exchange, J.P. Morgan discovered its surveillance of trading on multiple venues and trading systems was not operating correctly, resulting in gaps in J.P. Morgan’s trade surveillance on these venues.

 

On a specific U.S. designated contract market, J.P. Morgan failed to ingest into its surveillance systems—and thus failed to surveil—billions of order messages from 2014 through 2021.

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