CFTC Penalizes Non-U.S. Swap Dealer for Failing to Report Swap Transactions on Time
Commentary by Steven Lofchie
A non-U.S. swap dealer settled charges with the CFTC for failing to (i) timely report foreign exchange ("FX") swap, FX forward, and non-deliverable forward transactions to a swap data repository ("SDR"), and (ii) properly report non-deliverable forward transactions to an SDR. The firm paid a civil monetary penalty of $450,000.
According to the CFTC order, the failure to report these transactions arose when the swap dealer implemented a faulty software update to its FX trading platform, which inadvertently resulted in the wrong counterparty being identified as the reporting party for certain FX transactions. When the swap dealer discovered the error, it took remedial action, including entering into discussions with the SDR, but did not notify the CFTC until nearly eight months later.
The CFTC recognized that the firm cooperated with the CFTC Division of Enforcement's investigation by "self-reporting its errors, undertaking an internal investigation, and taking remedial action to correct its reporting failures."
Commentary
Whether they involve swaps or equities, the number of trade reporting violations that result from technology issues is substantial. When reporting technology goes wrong, trade reporting violations can multiply quickly until they reach a fantastic amount (followed by commensurate regulatory fines). Accordingly, it makes sense for firms to institute regular auditing processes in order to confirm that trade reporting is working as expected.