JP Morgan has been fined US$350 million and may not onboard new trading venues without receiving prior written non-objection from the Federal Reserve Bank of New York.
The Fed’s Board of Governors and the Office of the Comptroller of the Currency (OCC) conducted investigations into global trade surveillance practices at JP Morgan and found at various points in time it did not adequately surveil certain trading and order activity throughout the firm’s Corporate and Investment Bank (CIB) on at least 30 global trading venues, “which include systems or electronic platforms operated by investment firms or market operators that bring together third party buying and selling interests in financial instruments to conduct transactions” from 2014 to 2023.
The Fed has order that the bank may not onboard new trading venues without receiving prior written non-objection from the Fed and that requests for prior non-objection from the Fed shall be submitted at least thirty days prior to the proposed onboarding of a new trading venue. “All such requests shall contain a description of: (i) the trading activities the firm intends to conduct or facilitate on the proposed new trading venue; (ii) the market misconduct risks related to those trading activities; and (iii) the controls within the firm’s trade surveillance program that would surveil trading activities for market misconduct on the proposed trading venue,” writes Ann E. Misback, secretary of the board, at the Fed.
In addition, JP Morgan has to substantially complete an ongoing review of trading and order activities during the relevant period; and provide a written report to the Fed documenting the affected trading venue and trading activities, including the time period of non-surveillance, the volume of non-surveilled trading activity, and any related instances of market misconduct.
The bank also has to retain an independent third party which the Fed has approved, to assess the effectiveness of the bank’s trade surveillance programme, which will prepare a written report of findings and recommendations from the Trade Surveillance Program Review.
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