CFTC hits JPMorgan for $900,000 for clearing fees on CME

The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against J.P. Morgan Securities LLC (JPMS), a Delaware corporation headquartered in New York City, for failing to diligently supervise its officers’, employees’, and agents’ processing of exchange and clearing fees it charged customers for trading and clearing Chicago Mercantile Exchange, […]

chicago

The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against J.P. Morgan Securities LLC (JPMS), a Delaware corporation headquartered in New York City, for failing to diligently supervise its officers’, employees’, and agents’ processing of exchange and clearing fees it charged customers for trading and clearing Chicago Mercantile Exchange, Inc. (CME) products and products from certain other exchanges during 2010 to 2014. JPMS is registered with the CFTC as a Futures Commission Merchant and a swap dealer.

The CFTC Order requires JPMS to pay a $900,000 civil monetary penalty and cease and desist from violating the CFTC regulation governing diligent supervision.

The CFTC Order explains that customer transactions executed on exchanges are subject to payment of exchange and clearing fees that are applied to each transaction in the normal course of business. Clearing firms such as JPMS receive invoices for these fees from the exchange clearinghouses, which the firms pass on to their customers, the CFTC Order states.

Here, the CFTC Order finds that JPMS failed to implement and maintain adequate systems for reconciling invoices from exchange clearinghouses with the amounts of fees actually charged to its customers. JPMS’ fee reconciliation process was largely manual and carried out by only one employee at the end of the month using three different JPMS systems. In addition to insufficient staff to complete the fee reconciliation process accurately, JPMS did not have adequate written policies and procedures in place regarding its clearing and exchange fee reconciliations. According to the CFTC Order, this led to instances in which JPMS overcharged some customers in an aggregate amount of approximately $7.8 million. The CFTC Order finds that JPMS discovered the problem in 2014, self-reported it to the CFTC, and thereafter took remedial steps, including refunding adversely affected customers.

The Order recognizes JPMS’ significant cooperation with the CFTC’s Division of Enforcement during the investigation of this matter.

Third Such Action Brought by the CFTC

This is the third action that the CFTC has brought over a clearing firm’s supervisory failures over fee processing:

• In August 2016, the CFTC ordered Barclays Capital, Inc. to pay an $800,000 penalty relating to its processing of futures exchange and clearing fees charged to customers (see CFTC Order and Press Release 7419-16, August 4, 2016); and,

• In August 2014, the CFTC ordered Merrill Lynch, Pierce, Fenner & Smith Incorporated to pay a $1.2 million penalty relating to is processing of futures exchange and clearing fees charged to customers (see CFTC Order and Press Release 6984-14, August 26, 2014).

The CFTC Division of Enforcement staff members responsible for this case are Susan Gradman, Joseph Patrick, Elizabeth Pendleton, Brigitte Weyls, Scott Williamson, and Rosemary Hollinger.

Read this next

Digital Assets

BlackRock digs further into crypto with metaverse ETF

BlackRock, the world’s largest asset manager with almost $10 trillion in AUM, is set to launch a new metaverse ETF to help investors securely monetize on the booming immersive version of the internet.

Digital Assets

Binance wins license in New Zealand as rival Huobi shutters derivatives

Binance, the world’s largest crypto exchange by traded volume, has obtained licenses to operate in New Zealand, even after rival Huobi shutdown derivatives trading last month due to concerns about regulations.

Retail FX

Hong Kong busts perpetrators of ‘ramp and dump’ scam

Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), has charged thirteen suspects of market manipulation in a joint operation with the local police.

Institutional FX

TradingView integrates market data from German Tradegate exchange

TradingView announced that it ‎has increased data coverage to allow its users to receive information from ‎and get free access to the intra-day and tick data from Tradegate Exchange.

Retail FX

Spotware Systems introduces Custom Push Notifications for cTrader mobile apps

Spotware Systems, a technology provider for the electronic trading industry, is introducing a new push notification feature to alert mobile users of price swings and market fluctuations through their cTrader app.

Market News

The Week Ahead: 30 September from David Madden, Market Analyst at Equiti Group

Sterling dominated the headlines last week, as there were concerns the UK government might struggle to service its debt.

Inside View

How does the quality of signal providers affect your business?

A must-have onboarding process for brokers with investment services like PAMM, MAM, or copy trading

Technology

DBS deploys Nasdaq Trade Surveillance

“The confidence that markets and our clients have in DBS as a safe and trusted banking group is anchored on our ability to detect and respond to anomalous activity, which in turn calls for a robust surveillance and prevention infrastructure.”

Industry News

SEC charges Justin Costello and David Ferraro for securities fraud and posing as billionaire veteran

The Securities and Exchange Commission charged Cannabis executive Justin Costello and David Ferraro, an associate of Costello’s, for promoting the stock of several microcap companies on social media without disclosing their own simultaneous stock sales as market prices rose.

<