The Commodity Futures Trading Commission fined JPMorgan Chase $100 million, concluding a multiyear probe for failing to capture billions of dollars in its surveillance systems, the agency announced Thursday.
JPMorgan acknowledged that its scope and causes of surveillance data gaps from 2014 through 2021 violated CFTC regulations, but it neither admitted nor denied the findings. It noted that the surveillance gaps were completely rectified by 2023.
As part of the settlement, JPMorgan agreed to pay a civil monetary penalty of $200 million, with up to $100 million to be credited for amounts paid in parallel actions levied by the Office of the Comptroller of the Currency and the Federal Reserve in March. The OCC fined JPMorgan $250 million, and the Fed added another $98.2 million, bringing the total to $348.2 million.
The OCC’s cease-and-desist order requires JPMorgan to correct the deficiencies, seek the agency’s non-objection before onboarding new trading venues, and enlist an independent third party to assess the bank’s trade surveillance program.
CFTC Commissioner Kristin N. Johnson said in a statement Thursday that JPMorgan will also appoint a compliance monitor as part of additional undertakings required by the CFTC.
“J.P. Morgan admits notable compliance failures,” Johnson said. “Admissions comprise a critical component in remediation efforts and may foster deterrence. All too often, and in far too many instances, enforcement matters are resolved without an acknowledgment of the mistakes, misconduct, or compliance failures at the center of the enforcement action.”
In response to Bloomberg's request for comment, a JPMorgan spokesperson pointed to a statement the bank issued earlier on the probe.
“We self-identified the issue, significant remedial actions have been taken and others are underway; and we have not found any employee misconduct or harm to clients or the market in our review of the previously uncaptured data,” the bank said at the time, according to Bloomberg. “We do not expect any disruption of service to clients as a result of these resolutions.”
In 2021, while onboarding a new trading exchange, JPMorgan noticed discrepancies in its surveillance of trading on multiple venues and trading systems, leading to gaps in the bank’s trade surveillance in these instances. These gaps led the New York-based bank to fail to configure certain data feeds to ensure JPMorgan’s surveillance tools absorbed complete trade and order data.
“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,” the CFTC order said.
Though JPMorgan had a quarterly reconciliation process designed to warrant that some trade and order data were completely ingested into the surveillance systems, the bank kept direct-from-exchange data feeds from that reconciliation process “based on an erroneous assumption that data directly from an exchange was from a ‘golden source’ and thus did not need to be tested,” the CFTC noted.
In November, JPMorgan disclosed that it was cooperating with investigations into whether the bank had fully complied with requirements to provide comprehensive trading and order data.
