“We could not have brought the JPMorgan case without the data analytics program…”
JPMorgan Probe Was Revived by Regulators’ Data Mining
By Dave Michaels
The Wall Street Journal
Monday, October 5, 2020
WASHINGTON — Investigators probing whether traders at JPMorgan Chase rigged silver prices seven years ago decided there was no case to bring. Last week the same agency hammered the megabank with a $920 million fine.
How a small agency that once walked away from an investigation of price manipulation, only to later impose its biggest fine ever for the conduct, shows the advances government has made in using data to uncover market manipulation, said James McDonald, enforcement director of the Commodity Futures Trading Commission.
“We could not have brought the JPMorgan case without the data analytics program we have now,” said Mr. McDonald, who will step down as director this week after more than three years in the post.
The data needed to uncover the eight-year market manipulation scheme came from Chicago-based CME Group Inc., the operator of exchanges including one that offers trading in gold and silver futures. The volume of data — including trades, orders, and other messages flooding into CME’s computers — is so massive the CFTC couldn’t store or use it when Mr. McDonald began seeking it in 2017, he said.
Five years of complete CME trading data amounts to 1.7 terabytes, or 127 million pages of information, according to testimony in a recent trial that resulted in the conviction of two former Deutsche Bank AG traders on fraud charges related to spoofing.
As the CFTC added the ability to store and access more trading data in the cloud, it also hired former Chicago traders and other quantitative-minded employees to write programs that filter CME’s data for patterns of manipulation.
“There is really no other avenue that we have that allows us to be as proactive [investigating] as data,” Mr. McDonald said. …
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