US watchdog CFTC has fined a unit of J.P. Morgan $900,000
for overcharging customers trading on derivatives exchange
In a statement on Wednesday, the regulator said J.P Morgan
Securities (JPMS) failed to maintain adequate systems for
reconciling invoices from exchange clearinghouses, notably CME,
with the amounts of fees actually charged to its customers from
2010 to 2014.
This led to instances in which JPMS overcharged certain
clients an aggregate amount of $7.8m.
The fine follows an $800,000 penalty Barclays Capital paid
to the CFTC in August 2016 which related to the
firm’s processing of futures exchange and clearing
fees charged to customers.
Such fees are routine for any trade conducted on derivatives
bourses such as CME, ICE or CBOE.
Futures Commission Merchants (FCMs), such as JPMS and
Barclays, receive invoices for the fees from the exchange
clearinghouses before passing them onto their customers.
During the four year period, JPMS’ fee
reconciliation process was largely manual and carried out by
only one employee at the end of the month using three different
At the same time, the firm didn’t have adequate
written policies and procedures in place regarding its clearing
and exchange fee reconciliations.
The regulator acknowledged that JPMS has fully refunded
nearly all of the affected customers and taken steps to resolve
In January last year, the company rolled out its new
proprietary fee and commission calculation system and related
reconciliation tool, which replaced the fee-related
functionality of the firm's existing systems.
Barclays Capital had similar problems with its back office
software between 2011 and April 2015.
It also failed to adequately train staff on how to complete
According to the CFTC, this led to instances in which
Barclays overcharged some customers $1.1m.