J.P Morgan unit fined for overcharging CME traders
US watchdog CFTC has fined a unit of J.P. Morgan $900,000 for overcharging customers trading on derivatives exchange CME.
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 systems.
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 the issues.
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 the reconciliations.
According to the CFTC, this led to instances in which Barclays overcharged some customers $1.1m.
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