UPDATE 2-U.S. says JP Morgan manipulated market; settlement seen

Mon Jul 29, 2013 7:47pm EDT

* Regulator says found eight instances of gaming market

* Notice brings some details of investigation to light

* Settlement announcement expected on Tuesday, sources

WASHINGTON, July 29 (Reuters) - The U.S. power regulator outlined its case of market manipulation against JPMorgan Chase & Co on Monday as industry sources said a final settlement on the issue should come on Tuesday.

Traders used improper bidding tactics in California and the Midwest to boost profits, officials said in a statement that brought to light some details of an extensive investigation.

Reports of that probe have circulated for months and a deal with the regulator could put an end to a distraction for JPMorgan Chief Executive Jamie Dimon.

The U.S. Federal Energy Regulatory Commission (FERC) staff has found "eight manipulative bidding strategies" used by a JPM affiliate in 2010 and 2011, the regulator said.

JPMorgan declined to comment.

Two industry sources said a settlement over the trades could come as early as mid-morning on Tuesday. The bank is expected to pay around $400 million to end the investigation and the settlement could include other payments, according to reports and an industry source.

Monday's regulatory move did not contain any mention of specific traders or commodities chief Blythe Masters, who had been mentioned in media reports as having been singled out by investigators.

The FERC action is a reminder of the tougher regulatory environment commodity traders are facing, particularly banks, which have been under intensifying public and political pressure over their ownership of things such as metals warehouses and power plants.

JPMorgan announced abruptly on Friday that it was quitting the physical commodity markets, seeking a buyer or partner to take over an operation that includes ownership of three power plants, as well as a handful of large tolling agreements.

For a FACTBOX on JPMorgan's power deals:

The alleged violations in Monday's letter offered little new insight into the bank's trading, as most of the details had already been laid out in previous FERC filings.

If there is a settlement, JPMorgan would close the book on a probe that dates back more than two years when California's power grid operator noticed the bank was using an "abusive" trading strategy that effectively forced the grid to pay for plants to sit idle, ultimately adding to costs.

The FERC has been particularly active this month. The regulator approved a $470 million penalty against British bank Barclays Plc and four of its traders for manipulating California power markets. Barclays said it would fight the fine in court.

For JPMorgan, a deal would also allow CEO Jamie Dimon to make good on his promise to resolve multiple government investigations and regulatory run-ins over the past year. The bank, which is the biggest in the United States by assets, is under pressure in Washington for its size and for its $6.2 billion "London Whale" loss on derivatives trades last year.

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Comments (1)
FRPSR wrote:
This is the best we can do ?
Since Enron we have had the frauds of Investment “Bankers” providing triple A securities that were fluffed up mortgages which being discovered as known by the Investment “Banks” as not only weak , but rather conclusively doomed to go belly up . That these Investment “Banks” then knowledgeably sold these doomed securities to unwary professional brokerage firms who took the losses which set up the failures of the entire economic system concluding in the second great depression , which we are enduring here in middle America to this day , and all the foreseeable days in the future .
Now we find the Investment “Bankers” are repeating the frauds of Enron !
That this apes the Enron frauds our reaction is a grammar school stand in the corner and promise not to do it again slap on the wrist ?
Their must be real consequences and real punishment for the global suffering engineered by the actors , who with active approval of the unregulated greed and fraud of Investment “Bankers” sought for their own wealth at the cost of a large percent of the world capital and a cascading global trauma .

Jul 30, 2013 7:06am EDT  --  Report as abuse
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