Government Is Broadening Investigations of Spoofing-Like Practices
Dave Michaels, 17 March 2020
WASHINGTON—Authorities are investigating whether traders at JPMorgan Chase & Co. manipulated the market for Treasury securities and futures contracts, according to regulatory disclosures and people familiar with the matter.
The investigation shows that federal prosecutors and regulators continue to expand a campaign against an illicit practice known as spoofing, which has mainly focused on wily trading in derivatives. A move to scrutinize whether similar practices have affected the $17 trillion market for Treasury securities would open a new, and potentially more complicated, front in the war on spoofing.
The bank disclosed in a Feb. 25 regulatory filing that it is dealing with “related requests concerning similar trading-practices issues in markets for other financial instruments, such as U.S. Treasurys.” According to people familiar with the matter, the investigation also is probing the bank’s trading in futures. It couldn’t be learned which time period authorities are focusing their investigation on.
The Justice Department’s Fraud Section and regulators at the Commodity Futures Trading Commission are involved, the people said. A spokeswoman for JPMorgan declined to comment. A spokesman for the Justice Department declined to comment.
Regulators and other authorities cracked down on spoofing after Congress specifically outlawed the feinting strategy in 2010. Citigroup Inc. paid $25 million in 2017 to settle regulatory claims that five traders spoofed Treasury futures. The same year, the Bank of Tokyo-Mitsubishi UFJ, Ltd. paid $600,000 to resolve CFTC claims over similar misconduct.
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