Release Number 8695-23
Swap Dealer Pays Over $6.8 Million for Violations of Swap Dealer Business Conduct Standards
April 25, 2023
Washington, D.C. — The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against New York-based, provisionally registered swap dealer Mizuho Capital Markets LLC for trade practice violations of the Swap Dealer Business Conduct Standards in the Commodity Exchange Act (CEA) and CFTC regulations. The violations arise from Mizuho’s failure to make adequate disclosures to customers in connection with certain foreign exchange forward transactions.
The order requires Mizuho to cease and desist from further violations of these standards, pay $1,847,182.90 in restitution, and pay a $5 million civil monetary penalty.
“The CFTC’s settlement with Mizuho is the latest in a series of enforcement actions against swap dealers for violations of the Business Conduct Standards,” said Director of Enforcement Ian McGinley. “Congress mandated these standards to ensure that honesty and transparency prevail in swaps markets, including over-the-counter swaps markets. Our significant penalties here reflect the consequences swap dealers face from failing to meet these standards.”
When executing certain foreign exchange forward transactions known as “deal-contingent FX forwards,” Mizuho failed to adequately disclose to certain customers that it was trading in the minutes or seconds before Mizuho provided the spot exchange rate to, and executed the forward transaction with, the customer. This activity occurred from June 2018 to December 2020. This trading by Mizuho, at times, likely contributed to moving the spot exchange rate, in the relevant currency pair, against the customer. As a result of these actions, the customer may have obtained the currency it sought to acquire via the foreign exchange forward at a rate less favorable than may otherwise have been available. Mizuho may also have been able to hedge its exposure, vis-à-vis its customers, at a rate more favorable than may otherwise have been available. By failing to adequately disclose to its customers that it traded in this manner at times, Mizuho violated the Swap Dealer Business Conduct Standards.
The Division of Enforcement staff responsible for this matter are Ashley J. Burden, Bryan Hsueh, David A. Terrell, Scott R. Williamson, and Robert T. Howell.
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Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.