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US power regulator after JP Morgan Chase for market manipulation

Monday, July 29th 2013 - 21:48 UTC
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CEO Jamie Dimon abruptly announced on Friday that JP Morgan was quitting the physical commodity markets  CEO Jamie Dimon abruptly announced on Friday that JP Morgan was quitting the physical commodity markets

The US power regulator outlined its case of market manipulation against JPMorgan Chase & Co as industry sources said a final settlement on the issue should come on Tuesday. Traders used improper bidding tactics in California and the Midwest to boost profits, officials said in a statement that brought to light some details of an extensive investigation.

Reports of that probe have circulated for months and a deal with the regulator could put an end to a distraction for JPMorgan Chief Executive Jamie Dimon.

The U.S. Federal Energy Regulatory Commission (FERC) staff has found “eight manipulative bidding strategies” used by a JPM affiliate in 2010 and 2011, the regulator said.

Two industry sources said a settlement over the trades could come as early as mid-morning on Tuesday. The bank is expected to pay around 400 million dollars to end the investigation and the settlement could include other payments, according to reports and an industry source.

Monday's regulatory move did not contain any mention of specific traders or commodities chief Blythe Masters, who had been mentioned in media reports as having been singled out by investigators.

The FERC action is a reminder of the tougher regulatory environment commodity traders are facing, particularly banks, which have been under intensifying public and political pressure over their ownership of things such as metals warehouses and power plants.

JPMorgan announced abruptly on Friday that it was quitting the physical commodity markets, seeking a buyer or partner to take over an operation that includes ownership of three power plants, as well as a handful of large tolling agreements.

The alleged violations in Monday's letter offered little new insight into the bank's trading, as most of the details had already been laid out in previous FERC filings.

If there is a settlement, JPMorgan would close the book on a probe that dates back more than two years when California's power grid operator noticed the bank was using an “abusive” trading strategy that effectively forced the grid to pay for plants to sit idle, ultimately adding to costs.

The FERC has been particularly active this month. The regulator approved a 470 million dollars penalty against British bank Barclays Plc and four of its traders for manipulating California power markets. Barclays said it would fight the fine in court.

For JPMorgan, a deal would also allow CEO Jamie Dimon to make good on his promise to resolve multiple government investigations and regulatory run-ins over the past year. The bank, which is the biggest in the United States by assets, is under pressure in Washington for its size and for its 6.2 billion “London Whale” loss on derivatives trades last year.

Categories: Economy, Politics, United States.

Top Comments

Disclaimer & comment rules
  • ChrisR

    What goes around comes around.

    The good ol' boys will still be sitting pretty when all this is over, unlike the rest of us who had to pay for these prats.

    Jul 30th, 2013 - 06:13 pm 0
  • Captain Poppy

    I say market manipulation is a crime and BoD and Sr Mgt should be looking at jail time at Levenworth. Being a corporation is no excuse for not doing jail time. Directors and senior managers are suppose to be responsible. Not enough of them are prosecuted criminally.
    This fine shit and settlements have to go.......directors and tree cutting, road cleaning crews, etc, etc. Board of Directors might pull their heads out of their asses and get the idea then.

    Jul 31st, 2013 - 05:26 am 0
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