Swap Dealers Settle Charges for Foreign Currency Reporting Violations

Three affiliated swap dealers settled CFTC charges for violating foreign currency ("FX") swap reporting requirements.

In the Order, the CFTC found that the swap dealers erroneously believed that "tomorrow-next" short-dated swaps - in which currencies are exchanged on the business day after execution and then reversed at a pre-determined rate on the following business day - did not meet the criteria to be considered as "foreign exchange swaps" and thus did not need to be reported, which resulted in a failure to report a majority of their FX swaps.

As a result, the CTFC determined that the swap dealers violated Section 2(a)(13)(G) ("Jurisdiction of Commission") and Section 4r(a)(3) ("Reporting and recordkeeping for uncleared swaps") of the CEA and CFTC Rule 45.3 ("Swap data reporting: Creation data").

To settle the charges, the firms agreed to (i) pay an $850,000 civil monetary penalty and (ii) cease and desist from any further violations of the CEA or CFTC regulations.