Release Number 8604-22
CFTC Orders Swap Execution Facility to Pay $1.9 Million for Swap Reporting and Core Principle Violations
September 30, 2022
Washington, D.C. — The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against BGC Derivative Markets, L.P. (BGCD), a swap execution facility (SEF), for failing to report or accurately report thousands of swap transactions to the CFTC, a swap data repository (SDR), or the public; failing to timely correct reporting errors; and violating SEF Core Principles.
The order requires BGCD to cease and desist from further violations, pay a $1.9 million civil monetary penalty, and to comply with specified undertakings—including conducting a comprehensive review of its swaps reporting program and implementing a reconciliation process for transactions occurring on and reported by the SEF. The order further requires BGCD to submit a written report to the CFTC in one year. In the report, BGCD’s Chief Compliance Officer and Chief Executive Officer must certify that BGCD’s reconciliation process and compliance program are reasonably designed to detect and prevent violations of the Commodity Exchange Act (CEA) and CFTC regulations that are the subject of the order.
“Today’s enforcement action highlights the importance of accurate and timely swaps reporting and makes clear that persistent and recurring reporting failures violate SEF Core Principles. Accurate and timely swaps reporting is necessary for the CFTC to safeguard the integrity of our markets and to ensure market transparency,” said CFTC Acting Director of Enforcement Gretchen Lowe.
The order specifically finds that from January 2017 to March 2022, as a result of 11 separate reporting systems issues, BGCD failed to report or accurately report nearly 12,500 swap transactions to the CFTC and/or to the public on its public website. As a result of three other reporting systems issues during this same time period, BGCD failed to report real-time transaction and pricing data for over 3,500 transactions to an SDR and further failed to timely submit corrected data to the SDR for a subset of those transactions. In aggregate, these 14 issues led to BGCD’s failure to report or accurately report (including both under and over reporting) over 16,000 swap transactions in various products (interest rate, FX, credit, and equities), on hundreds of trading dates.
The order further finds BGCD had inadequate processes and procedures for reporting swap transactions and identifying reporting issues as they arose. As a result, BGCD did not timely identify the majority of these reporting issues. Specifically, over half of BGCD’s reporting issues were unknown to BGCD for eight months or more, with two of them being undetected (and uncorrected) for over four years. Moreover, these persistent and recurring issues, according to the order, show BGCD’s capacity to capture and transmit accurate and complete trade information to the public and to the CFTC was deficient. Further, the order finds BGCD was aware it lacked a process for reconciling its reports with the SEF’s trading activity, but failed to timely implement a reconciliation process or other policies and procedures to significantly reduce, if not eliminate, these reporting and publication errors.
The Division of Enforcement appreciates the assistance of the Division of Market Oversight and the Division of Data.
The Division of Enforcement staff members responsible for this case are Rebecca Jelinek, Lauren Fulks, Tom Simek, Chris Reed, and Charles Marvine.