JPMorgan to pay $600,000 for cotton position violations

WASHINGTON Thu Sep 27, 2012 5:30pm EDT

Commuters are reflected in stone as they walk past the JP Morgan headquarters in New York, May 17, 2012. REUTERS/Eduardo Munoz

Commuters are reflected in stone as they walk past the JP Morgan headquarters in New York, May 17, 2012.

Credit: Reuters/Eduardo Munoz

WASHINGTON (Reuters) - JPMorgan Chase Bank NA agreed to pay $600,000 to settle charges it violated cotton futures position limits, the U.S. Commodity Futures Trading Commission said on Thursday.

According to the CFTC, the bank's positions in cotton futures traded on the IntercontinentalExchange U.S. (ICE.N) exceeded limits on several days between September 16 and October 5, 2010.

JPMorgan's positions were held as a result of an "inadvertent deficiency" in the bank's automated position limit monitoring system, which tracks current positions relative to the applicable position limits, the CFTC said.

However, after learning of the deficiency, JPMorgan put in place a manual position limit monitoring process that failed to keep the bank from further violations, the CFTC said.

JP Morgan Chase Bank NA is owned by JPMorgan Chase and Co (JPM.N). The bank declined to comment.

The order is the latest in a flurry of position limit settlements announced by the CFTC in the lead-up to new caps on the number of contracts that traders can hold in certain markets.

Earlier on Thursday, the CFTC announced that Australia and New Zealand Banking Group Ltd (ANZ.AX) had agreed to pay $350,000 to settle charges it violated position limits in the wheat and cotton futures markets.

On Tuesday, the CFTC announced that a little-known Shanghai, China, firm, Sheenson Investments Ltd, and its founder, Weidong Ge, had agreed to return $1 million in ill-gotten gains and pay a $500,000 civil penalty for exceeding federal limits on speculative bets in soybean oil and cotton futures.

Last Friday, the agency ordered Citigroup Inc (C.N) and a subsidiary to pay $525,000 for violating limits in the wheat market.

The new set of trading curbs kicks in October 12. The rules, which aim to rein in speculation and limit price spikes, were included in the 2010 Dodd-Frank financial reform law and finalized by the agency last October. Additional caps are expected to take effect next year.

Financial industry groups have sued to stop the new position-limit rules, saying they would irreparably harm the marketplace and that the CFTC failed to sufficiently weigh the economic consequences of the rule, as is required by law.

Traders and some Republican lawmakers have argued there is no evidence that speculators inflate prices.

A judge has not yet ruled in the case, which was filed by the Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association in December.

(Reporting By Alexandra Alperl; editing by Carol Bishopric and Jim Marshall)

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Comments (1)
Orsius wrote:
But wait — didn’t JPM’s own Blythe Masters deny anything like this could ever happen at the bank? And to think so is just the wacky speculation of the “blogosphere”? Yes, I believe in an interview on CNBC back in April she said just this: “That’s right, it’s (running a one-directional book and manipulating the market) is not part of our business model. It would be wrong and we don’t do it.”

Wow that “blogosphere” sure was wacky to think this, right?

Sep 27, 2012 12:39am EDT  --  Report as abuse
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