Dec 7, 2020
Oct 2, 2020
JPMC Spoofing Settlement
The CFTC and SEC have release separate orders which fines JPMorgan Chase and Company (JPMC) desks) for spoofing and manipulation of markets - specifically the Treasury and Metals markets.
The CFTC order is filing and settling charges with JPMC and its subsidiaries. To quote
for manipulative and deceptive conduct and spoofing that spanned at least eight years and involved hundreds of thousands of spoof orders in precious metals and U.S. Treasury futures contracts on the Commodity Exchange, Inc., the New York Mercantile Exchange, and the Chicago Board of Trade "
JPMC is required to pay a fine of $920.2 million, split as restitution ($311.7 million; highest ever), disgorgement ($172 million) and civil monetary penalty ($436.4 million).
Parallelly, the Department of Justice’s Fraud Section and the United States Attorney’s Office have reached an agreement to defer criminal prosecution of JPMC on charges of wire fraud. The agreement requires JPMC to to pay a criminal fine, disgorgement, and restitution.
The SEC order files and settles charges against JPMS (JPM Treasury Desks) and levies disgorgement and a civil monetary penalty.
The CFTC order will recognize and offset any restitution and disgorgement payments made to the DOJ and the SEC.
Case background
Between 2008 through 2016, JPM, through numerous traders on its precious metals and Treasuries trading desks, placed orders to buy certain metal future contracts and Treasury bond futures contracts with the intent to cancel those orders prior to execution. These orders sent false signals of supply or demand designed to deceive market participants into executing against other orders they wanted filled..
.*An example cited in the SEC order, to quote
"For example, on May 20, 2015, JPMS Treasuries Desk Trader 1 placed a sell order for one (1) lot of the 30-Year Treasury Bond at a best ask price of $98.921875. After not being filled, the order was modified to a two (lot) limit order placed such that only an order of one (1) lot was publicly visible to other market participants (i.e., an “iceberg” order). When the order was still not filled approximately ten seconds later, the trader placed an opposing non-bona fide order to buy ten (10) lots of the same series of Treasury Bond at an above best bid price of $98.90625. One second later, the order to sell was executed at the favorable best ask price. Two seconds later, the trader canceled the non-bona fide buy order"
Several such events have been cited and monitored by the SEC
SEC order says that JPMS profited by executing buy orders for Treasury securities at lower prices, or sell orders for Treasury securities at higher prices, than it otherwise would have secured absent the JPMS Treasuries Desk Traders’ manipulative trading.
There is a history of this investigation and one can find this from WSJ articles (see this https://www.wsj.com/articles/justice-department-charges-three-traders-over-alleged-metals-contracts-manipulation-11568646947)
Interestingly enough these charges against the traders included racketeering which is usually applied in cases against organized entities (the RICO statute).
Links to the CFTC and SEC orders