CFTC comments on ION Cleared Derivatives issues after Russian-linked hack

Rick Steves

“The ongoing issue is impacting some clearing members’ ability to provide the CFTC with timely and accurate data. As this incident unfolded, it became clear that the submission of data that is required by registrants will be delayed until the trading issues are resolved.”

The Commodity Futures Trading Commission Divisions of Clearing and Risk, Market Participants, Data, and Market Oversight has released a statement on a cyber-related incident at ION Cleared Derivatives.

ION Cleared Derivatives, the ION Markets subsidiary that provides software for automating the trading lifecycle and the derivatives clearing process, stated it had experienced “a cybersecurity event commencing on 31 January 2023 that has affected some of its services. The incident is contained to a specific environment, all the affected servers are disconnected, and remediation of services is ongoing.”

The cybersecurity event was a ransomware attack that forced several European and U.S. banks to revert to manual processes.

A memo from Ion obtained by Bloomberg confirmed the attack was the work of the Russian-linked LockBit ransomware gang, who claimed responsibility for the attack and is threatening to leak data stolen from the company on February 4 unless a ransom demand is paid.

Bloomberg reported that the attack affected at least 42 of Ion’s clients and forced several European and U.S. financial institutions to process some derivative trades manually.

Following comments from The Futures Industry Association and the U.S. Treasury, the CFTC staff stated:

“This week, CFTC staff alongside fellow regulators, market participants, and impacted parties have worked to understand the issues surrounding the cyber incident and to help ensure the CFTC regulated derivatives markets were not compromised.

“The ongoing issue is impacting some clearing members’ ability to provide the CFTC with timely and accurate data. As this incident unfolded, it became clear that the submission of data that is required by registrants will be delayed until the trading issues are resolved. As a result, the weekly Commitments of Traders report that is produced by CFTC staff will be delayed until all trades can be reported. A report will be published upon receipt and validation of data from those firms.

“Further, Commission staff recognizes that certain reporting firms affected by the incident at ION do not have enough information at this time to fully prepare the daily large trader reports required under Part 17 of the Commission’s regulations. Each affected reporting firm should use best estimates in preparing those reports, working with Commission staff, to ensure timely compliance. A reporting firm should also file revised reports once the reporting firm’s systems are operational. Commission staff will consider any necessary further action as appropriate.”

Ion told clients on Thursday that its systems won’t be fully operational until February 6, according to Bloomberg.

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