CFTC Fines JPMorgan for Swap Reporting Failures

The Commodity Futures Trading Commission in the US (CFTC), announced yesterday that it has imposed a civil monetary penalty worth $850,000 on JPMorgan, one of the leading financial firms in the United States, for the company’s failure to comply with the reporting obligations related to the swap dealing.

In an official announcement released by the authority on 5 July, the CFTC noted that it had ordered JPMorgan to cease and desist from any further violations of the Commodity Exchange Act. The CFTC’s Acting Director of Enforcement, Gretchen Lowe highlighted the importance of timely reporting of swap transactions.

“Timely and accurate reporting of swaps transactions by registered swaps dealers is critical to the CFTC’s mission to protect market participants and ensure market transparency and integrity,” Lowe said in the press release.

In the past few months, the CFTC has increased its efforts to counter illegal financial trading activities under its jurisdiction. In May 2022, the authority charged an American resident who was involved in a $59 million illegal FX scheme. During the same month, the CFTC busted a ponzi crypto investment scheme worth $44 million.

Context of JPMorgan’s Case

The CFTC outlined that JPMorgan failed to report almost 2.1 million short-dated foreign exchange (FX) swap transactions between September 2015 and February 2020. For the mentioned period, the unreported short-dated FX swap transactions accounted for nearly 51% of the total number of FX swaps executed by JPMorgan.

“Short-dated FX swaps are transactions in which the parties exchange two currencies the day after execution and then reverse that exchange at a predetermined rate on the following business day. A short-dated FX swap is a reportable FX swap transaction because it involves an exchange of currencies and a reversal of that exchange on specific dates and at rates fixed at the inception of the contract. Consequently, J.P. Morgan was obligated to report its short-dated FX swaps under the relevant statutory and regulatory provisions, which it failed to do during the relevant period,” the CFTC explained.