The Commodity Futures Trading Commission today announced two orders filing and simultaneously settling charges against two swap execution facilities (SEFs), BGC Derivative Markets, L.P. and GFI Swaps Exchange, LLC, for failing to properly report data related to thousands of swap transactions and violating SEF Core Principles, and against BGC SEF for also violating a prior CFTC order.
The SEFs admit the facts in the orders and are ordered to cease and desist from further violations of these swap reporting provisions and SEF Core Principles and are ordered to comply with remedial undertakings, including submitting reports to the CFTC, attested to by their respective chief compliance officer and chief executive officer, within one year.
BGC SEF is also ordered to cease and desist from further violation of the prior CFTC order and to retain an independent compliance consultant to advise on implementing the ordered remediation. The orders require BGC SEF to pay a $750,000 civil monetary penalty, and GFI SEF to pay a $550,000 civil monetary penalty.
“These actions continue to highlight the value of timely self-reporting, remediation, and cooperation with the Division of Enforcement, along with the importance the CFTC places on accurate and timely swaps reporting,” said Director of Enforcement Ian McGinley. “They also demonstrate the importance of SEFs’ obligations to enact appropriate controls for system design, implementation, and testing. When SEFs fail to meet these obligations, outside assistance may be necessary, especially when the failures come on the heels of a prior enforcement action on these same provisions.”
Background
The BGC SEF order finds from December 2022 to April 2024, as the result of five reporting systems issues, BGC SEF failed to report, accurately report, or publish data related to thousands of transactions. Additionally, BGC SEF real-time reported erroneous execution times to a swaps data repository for thousands of voice-executed interest rate swap transactions. BGC SEF’s swap reporting failures and inaccurate reports, as well as its failure to promptly identify and correct the underlying causes, were the result of BGC SEF’s swap reporting system design and its inadequate system of internal controls and procedures. These violations occurred after the CFTC issued an order against BGC SEF on Sept. 30, 2022, for violations under the Commodity Exchange Act and CFTC regulations of the same swap reporting provisions and all but one of the same SEF Core Principles.
The GFI SEF order finds from July 2017 to February 2024, as the result of six reporting systems issues, GFI SEF failed to report, accurately report, or publish data related to thousands of transactions. GFI SEF’s swap reporting failures and inaccurate reports, as well as its failure to promptly identify these errors, were the result of insufficient swap reporting processes, its swap reporting system design, and an inadequate system of internal controls and procedures.
Both orders also found SEF Core Principle violations. First, the SEFs had recurrent reporting and publication failures and inadequate processes for reporting complete and accurate swap transaction information. Second, the SEFs failed to design and sufficiently test their swap transaction and reporting system to ensure compliance with their swap reporting obligations and lacked sufficient processes and procedures surrounding the design, testing, implementation, and operation of their swap transaction and reporting system.
The Division of Enforcement appreciates the assistance of the Division of Market Oversight and the Division of Data.
Division of Enforcement staff responsible for this case are Rebecca Jelinek, Tom Simek, Chris Reed, and Charles Marvine.
