Swap Dealer Settles CFTC Charges for Disclosure Failures Involving "Same-Day" Swaps

A swap dealer settled CFTC charges relating to a failure to disclose the pre-trade-mid-market-mark ("PTMMM") of equity index swaps.

As outlined in the Order, the CFTC also found that the firm "opportunistically solicited certain clients to enter into an unconventional type of equity index swap transaction, called a 'same-day' swap." With such a swap, the "equity leg of the swap strikes on the 'same day' as the other material terms of the swap are agreed upon, rather than—as is typical—the day after the date of agreement."

As a result, the CFTC concluded that the firm violated CEA Section 4s(h)(1) ("Registration and regulation of swap dealers and major swap participants") and CFTC Rules 23.431 ("Disclosures of material information") and 23.433 ("Communications-fair dealing").

To settle the charges, the swap dealer agreed to (i) a censure, (ii) pay a $15 million civil monetary penalty, and (iii) comply with the conditions and undertakings set forth in the Order.