JPMorgan To Pay $100M To Settle Credit Default Swap Manipulation Claims

by Tara Arick on October 18, 2013 · 0 comments

in Banking

JPMorgan Chase Bank N.A. has agreed to pay $ 100 million and to cease and desist in the violation of provisions of the Commodity Exchange Act (CEA) for its role in manipulating a massive credit default swap (In the Matter of JPMorgan Chase Bank N.A., No. 14-01, CFTC).

Under the terms of the settlement, in addition to the civil penalty, JPMorgan will cease and desist from violating Section 6(c) of the CEA, which was amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Commodities Futures Trading Commission (CFTC) Regulation 180.1.

JPMorgan and its successors and assigns must also comply with a number of “conditions and undertakings” as part of the settlement agreement.

Written Enhancements

“JPMorgan undertakes to continue to implement written enhancements to its supervision and control system in connection with swaps trading activity, including trading and risk management controls reasonably designed to prevent and promptly detect mis-marketing of its books, enhanced communications among risk, control and supervisory functions, and the development of additional surveillance tools designed to assist supervisors with monitoring trading activity in connection with swaps,” according to the CFTC’s order instituting the proceedings and making findings and imposing remedial sanctions.

The CFTC filed the administrative proceedings against JPMorgan, which is a subsidiary of JPMorgan Chase and Co., alleging that JPMorgan violated Dodd-Frank’s prohibition on manipulative conduct when it engaged in an “aggressive trading strategy” and massive sale of a particular credit default swap known as CDX.

The CFTC contended that JPMorgan “recklessly disregarded the fundamental precept on which market participants rely, that prices are established based on legitimate forces of supply and demand.”

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