The US Commodity Futures Trading Commission (CFTC) imposed a $200 million fine on a JPMorgan unit due to the failure to record billions of orders in its surveillance systems from 2014 to 2021. JPMorgan will only pay $100 million, with the remaining amount offset by a previous penalty. J.P. Morgan Securities faced a civil monetary penalty along with a cease and desist order for violating the CFTC’s supervision requirements.
Heavy Fine Imposed on JPMorgan
On Thursday, the regulatory agency outlined that JPMorgan acknowledged the order’s surveillance data gaps, without explicitly confirming or refuting the findings. JPMorgan has settled the charges with the regulator by paying a substantial penalty.
Ian McGinley, the Director of Enforcement at CFTC, stated that today’s resolution involves a substantial penalty, specific factual admissions, and the appointment of a consultant to oversee remediation.
Sending a clear message that CFTC registrants must ensure trade and order data from exchanges are ingested into surveillance systems and orders are monitored through testing and other means.
Significant Gaps in the JPMorgan System
In 2021, JPMorgan discovered deficiencies in its trading surveillance across various platforms. It revealed operational issues with the trading systems causing surveillance gaps. From 2014 to 2021, the company failed to process billions of order messages into its surveillance system, mainly from “sponsored access trading activity for three major algorithmic trading firms.”
The bank stated, “We identified the issue ourselves, and took significant remedial actions, with others still in progress. In our review of the previously missed data, we found no employee misconduct or harm to clients or the market. We assure clients that these resolutions will not disrupt our services.”