J.P. Morgan Securities LLC Agrees to Pay $140,000 Penalty for Confirming the Execution of a Prearranged Trade on the CBOT
Trade was in ten year U.S. Treasury Note Futures spreads
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and simultaneously settling charges against futures commission merchant J.P. Morgan Securities LLC (JPMS) of New York, N.Y., for confirming the execution of a prearranged trade of ten year U.S. Treasury Note Futures spreads, which was a fictitious sale and noncompetitively executed on the Chicago Board of Trade (CBOT).
The CFTC order requires that JPMS pay a $140,000 civil monetary penalty. The order also requires JPMS to cease and desist from further violations of the Commodity Exchange Act (CEA) and CFTC regulations and to comply with certain undertakings.
The CFTC order finds that on one occasion in 2010, a JPMS Morgan employee engaged in pre-execution communications with a customer. The customer directed the JPMS employee to sell a certain number of ten year Treasury spreads, and also told the JPMS employee to look for any “all or nones,” as the customer wanted to buy those spreads. An “all or none” order must be filled in its entirety. The JPMS employee identified an all or none bid for the exact same amount as the sell order and sold to that bid, with the result that the customer was on both sides of the transaction, according to the order. The order finds that JPMS, through its employee, confirmed the execution of a prearranged trade, which was both noncompetitively executed and a fictitious sale.
The order finds JPMS liable for its employee’s violations of the CEA and CFTC regulations, as the employee was acting within the scope of his employment with JPMS.
In settling this matter, the CFTC has taken into account JPMS’ effective cooperation during the CFTC’s investigation.
The CFTC thanks the CME Group for its assistance.
CFTC Division of Enforcement staff responsible for this case are David Chu, Diane M. Romaniuk, Ava M. Gould, Scott R. Williamson, Rosemary Hollinger, and Richard B. Wagner.
From the CFTC