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Regulation

J.P. Morgan settles CFTC interest-rate benchmark manipulation charges

J.P. Morgan Chase will pay $65 million to settle CFTC charges that the bank tried to manipulate the U.S. Dollar International Swaps and Derivatives Association Fix, a global benchmark used in a range of interest-rate products, to benefit its derivatives positions.

The Commodity Futures Trading Commission said in a news release Monday that J.P. Morgan Chase made false reports over the five years ended January 2012 on its USD ISDAFIX valuations and used two methods to manipulate the benchmark — at 11 a.m. Eastern time on trading days when the rate is set for valuation of interest-rate products and cash settlements, and later on those days when rates were published.

The USD ISDAFIX is used as a benchmark for cash settlement of options on interest-rate swaps, or swaptions, and as a valuation tool for certain other interest-rate products.

The CFTC said J.P. Morgan Chase agreed to strengthen its internal controls and procedures relating to the setting of interest-rate swaps benchmarks, "including measures to detect and deter trading or other conduct potentially intended to manipulate directly or indirectly swap rates, including benchmarks based on interest-rate swaps," according to the release.

A statement from a spokesman at J.P. Morgan said the firm is "pleased to have this matter behind us."

The settlement is the latest involving the CFTC and banks over allegations of USD ISDAFIX manipulation. Deutsche Bank Securities paid $70 million in a settlement announced in February, while Royal Bank of Scotland, Goldman Sachs and Citibank paid a combined $455 million in settlements reached in 2016 and 2017.