J.P. Morgan Securities fined $200m by CFTC for surveillance failures

J.P. Morgan Securities has been ordered to pay a $200m civil penalty due to alleged shortcomings in its surveillance systems.

According to Markets Insider, the CFTC’s investigation revealed that J.P. Morgan Securities failed to adequately capture billions of client orders, a violation with substantial regulatory consequences.

The order from the CFTC sheds light on the scope and causes of the surveillance data gaps identified within J.P. Morgan Securities. It discloses that during the onboarding process for a new trading exchange in 2021, significant deficiencies were unearthed in J.P. Morgan’s trade surveillance across multiple venues and trading systems. These deficiencies resulted in substantial gaps in the firm’s ability to monitor trading activities effectively.

According to the CFTC order, the surveillance gaps primarily stemmed from J.P. Morgan’s failure to configure certain data feeds properly. This failure led to incomplete ingestion of trade and order data into the firm’s surveillance tools, thereby compromising its ability to detect and address potential market abuses or irregularities.

Notably, the investigation found that J.P. Morgan neglected to surveil billions of order messages on a specific U.S. designated contract market from 2014 through 2021, primarily relating to sponsored access trading activity for three significant algorithmic trading firms.

In response to these findings, J.P. Morgan has represented that the surveillance gaps were fully remediated by 2023, indicating efforts to rectify the identified shortcomings in its surveillance infrastructure.

However, the CFTC’s enforcement action underscores the critical importance of robust surveillance mechanisms within financial institutions to maintain market integrity and uphold regulatory standards.

Keep up with all the latest FinTech news here

Copyright © 2024 FinTech Global

Enjoying the stories?

Subscribe to our daily FinTech newsletter and get the latest industry news & research


The following investor(s) were tagged in this article.