::. l • •• , UNITED STATES OF AMERICA Before the .,: I:: 'fl ~. ~ (; COMMODITY FUTURES TRADING COMMISSION In the Matter of: JPMorgan Chase Bank, N.A., ) ) ) ) ) CFTC Docket No. 14 - 01 ________ -----"R.:........:..:es::..J.p=--:o'---n---'d=--:e~n:._=_t.~ __ ) 1. ORDER INSTITUTING PROCEEDINGS PURSUANT TO SECTIONS 6(c) and 6(d) OF THE COMMODITY EXCHANGE ACT, MAKING FINDINGS AND IMPOSING REMEDIAL SANCTIONS I. The Commodity Futures Trading Commission ("Commission") has reason to believe that JPMorgan Chase Bank, N.A. ("JPMorgan") violated the Commodity Exchange Act ("Act") and Commission Regulations ("Regulations"). Therefore, the Commission deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted to determine whether JPMorgan has engaged in the violations as set forth herein and to determine whether any order should be issued imposing remedial sanctions. II. In anticipation of the institution of this administrative proceeding, JPMorgan has submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. JPMorgan admits the findings in parts III-A through III-C herein, and neither admits nor denies the other findings and conclusions herein, and consents to the entry of this Order Instituting Proceedings Pursuant to Sections 6( c) and 6( d) of the Commodity Exchange Act, Making Findings and Imposing Remedial Sanctions ("Order") and acknowledges service of this Order. I 1 JPMorgan consents to the entry of this Order and to the use of these findings in this proceeding and in any other proceeding brought by the Commission or to which the Commission is a party; provided, however, that JPMorgan does not consent to the use ofthe Offer, or the findings or conclusions in this Order consented to in the Offer, as the sole basis for any other proceeding brought by the Commission, other than a proceeding in bankruptcy, receivership, or to enforce the terms of this Order. Except as admitted in parts III-A through III-C of this Order, JPMorgan also does not consent to the use of the Offer or th is Order, or the findings or conclusions in this Order consented to in the Offer, by any other party in any other proceeding. III. The Commission finds the following: A. Summary The credit default swap ("CDS") market comprises globally traded credit derivatives used by various market participants to speculate on and hedge against credit defaults, and, as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act of2010 ("Dodd-Frank Act"), the market for CDS that reference broad-based credit indices is subject to the Commission's jurisdiction. Tens of trillions of dollars in notional value of CDS instruments are traded and held by market participants seeking to transfer risk of credit defaults by companies in the United States and around the world. As such, the CDS market is an important aspect of the global economy. Market pmiicipants are entitled to rely on the notion that CDS prices are established based on legitimate forces of supply and demand. 2 However, on February 29, 2012, JPMorgan traders acted recklessly with respect to this fundamental precept by employing an aggressive trading strategy concerning a particular type of CDS known as "CDX." From approximately 2007 through 2011, a JPMorgan unit, the ChiefInvestment Office ("CIO"), operating through a trading desk in a JPMorgan branch in London, purchased and sold default protection in a portfolio of CDX and other credit default indices. As of the end of 2011, the CIO held a substantial position in CDX and other credit default indices, with a net notional value of more than $51 billion, including $217 billion in long risk positions and $166 billion in short risk positions. At the end of each trading day, traders in the CIO "marked" the positions in this swaps portfolio "to market," assigning a value to the portfolio's positions using various measures including market prices for the credit default index positions. The traders' marks were used to calculate profits and losses ("P&L"). Although previously quite profitable, as early as late January 2012 the portfolio's value had taken a serious turn for the worse. In February 2012, daily losses were large and growing, and by February 29 the traders believed the portfolio's situation was grave. Just ahead of critical February month-end internal portfolio valuations that would be distributed widely within JPMorgan through the P&L statement, the traders in the CIO, who wanted to reduce mark-to-market losses, recklessly employed an aggressive trading strategy on February 29 in connection with one particular CDX, the CDX.NA.IG.9 10 year index ("IG9 1 OY"). In particular, as the value of the portfolio stood to benefit as the IG9 10Y market price dropped, on February 29, the CIO sold on net more than $7 billion of IG9 lOY, a staggering, record-setting, volume, $4.6 billion of which was sold during a three hour period as that day drew to a close. The February 29 trading followed sales of 2 Prices on CDS and index CDS instruments such as CDX, further described infl'Cl, are often called spreads, which are the annual payments for the credit protection exchanged, quoted in basis points per year ("bps"). Basis points represent III Oath of a percent. The annual payments are calculated based on the spread multiplied by the notional amount of the contract. Spreads reflect the riskiness of the underlying reference obligation and "widen" (increase) as credit risk increases, and "tighten" (decrease) as credit risk decreases. 2 protection of more than $3 billion of this index in the previous two days. To put the quantity sold by the CIO into perspective, the net volume sold by the CIO over those three days amounted to roughly one-third of the volume traded for the entire month of February by all other market participants. During this same period at month-end, the market price on IG9 lOY dropped substantially and the CIO was selling at generally declining prices. The value of the position that the CIO held benefited on a mark-to- market basis from the declining market prices.3 lPMorgan's controls and supervision over the CIO did not prevent the CIO from first accumulating the massive portfolio of positions in certain CDX and other credit default indices, and then from taking the steps to conceal the losses. In luly 2012, lPMorgan's parent company disclosed that it had lost confidence in the integrity of the traders' marks and acknowledged that it ultimately lost more than $6 billion in 2012 in connection with the CIO's CDS index trading. Since the enactment of the Dodd-Frank Act, the Commission has been implementing reforms that Congress mandated to regulate swap dealers. These include internal business conduct rules that require swap dealers to, among other things, establish policies to manage risk and adhere to supervision obligations. lPMorgan's provisional registration with the Commission as a swap dealer took effect on December 31, 2012, which means that these specific internal business conduct rules did not apply to lPMorgan until after the CIO events described in this Order. B. Respondent lPMorgan is a subsidiary of lPMorgan Chase & Co., a leading global financial services firm that engages in a wide variety of financial services, including banking, mOltgage lending, securities, credit card issuance, commodities trading, and asset management. lPMorgan Chase & Co. (including lPMorgan and other subsidiaries) is the largest derivatives dealer in the United States, active in derivatives markets involving 3 Two now former JPMorgan traders have been accused of concealing trading losses from others at JPMorgan by using deceptive practices in how they marked the pOltfolio to market. These two traders' alleged deceptive practices are the subject of criminal charges brought against them by the United States Attorney for the Southern District of New York, as well as civil enforcement charges brought against them by the United States Securities and Exchange Commission ("SEC"). See Us. v. Martin-Artaja, No. 1:13-MJ-1975 (S.D.N.Y., filed Aug. 9,2013), Us. v. Grout, No.1: 13-MJ-1976 (S.D.N.Y., filed Aug. 9, 2013), and SEC v. Martin-Artaja, et aI., No. 1:13-CY-5677-GBD (S.D.N.Y., filed Aug. 14, 2013). The facts alleged in these two sets offt'aud charges also provide a basis for the Commission to charge the two traders with violations of Section 6(c)(1) of the Act, 7 U.S.C. § 9 (2012), and Regulation 180.1, 17 C.F.R. § 180.1 (2012), which prohibit, among other things, "any act, practice, or course of business, which operates or would operate as a fraud or deceit upon any person" "in connection with any swap." Neveltheless, although the Commission at times brings actions in parallel to actions by other authorities, based on the facts and circumstances presented here as well as resource constraints faced by the Commission, the Division of Enforcement has determined not to recommend a third set of virtually identical U.S. fraud charges against these two individuals at this time. 3 commodities, credit instruments, equities, foreign currencies, and interest rates. 4 As of December 31, 2012, JPMorgan is provisionally registered with the Commission as a swap dealer. C. Facts 1. The Chief Investment Office (CIO) According to JPMorgan documents, the CIO's "key mandate" was to "[0 ]ptimize and protect [the organization]'s balance sheet from potential losses, and create and preserve economic value over the longer-term." JPMorgan's businesses, including those of affiliates-which include financial services, commercial and investment banking, financial transaction processing, and asset management-generated excess cash because deposits received by the businesses exceeded loans they made. CIO, along with JPMorgan's Treasury, was charged with managing JPMorgan's excess deposits. CIO did this by investing the bulk of the cash in an available-for-sale ("AFS") pOlifolio of fixed- income securities. Consistent with its mandate to protect JPMorgan against potential losses, the CIO established the "Synthetic Credit Portfolio" ("SCP") in 2007 to protect the firm against adverse credit events affecting the AFS portfolio and other credit exposure in the organization. The SCP included positions in CDX and CDX tranches. 5 The traders and their direct supervisors who were directly responsible for trading in the SCP ("SCP traders") sat together or near one another on a trading floor in JPMorgan's offices in London, and often discussed their business and trading strategies with one another in person orally, over email, on various electronic chat systems, and on the telephone. From its inception in 2007 until late 2011, the SCP generated roughly $2 billion in gross revenues. A CDS references an entity whose credit is the subject of protection purchased by one party and sold by the other patiy. A credit default index, such as CDX, contemplates protection purchased and sold on a group, or "basket," of reference entities' credit. A tranche of a CDX involves protection on a stated subset of the basket. CDS and CDX 4 See "OCC's Quarterly Report on Bank Trading and Derivatives Activity Second Quarter 2012," Office of Comptroller of Currency, at Tables 1-5 and Graph 3, http://www2 . occ. gov /topics/capita I-markets/fi nancial-markets/trad ing/ deriva tives/ dq 1 12. pdf. 5 Markit Group Ltd. ("Mark it") owns credit default indices that were included in the SCPo Markit performs a variety of services related to credit default indices, including calculating the index values and publishing the daily index prices on its website. The credit default indices, such as CDX, and tranches are generally graded as either investment grade (known as "IG"), which include reference entities with higher credit ratings because they carry a relatively lower risk of default, or high-yield (known as "HY"), which include reference entities with lower credit ratings because they carry a greater risk of default. Each year, Markit issues two new series of each index with an updated listing of reference entities contained in the index (125 names in the IG indices and 100 in the HY indices). For example, in 2007, Markit issued an investment-grade credit default index that referenced North American entities. This particular CDX was the ninth IG CDX that Markit had issued. It is therefore generally referred to as the "CDX.NA.IG9." 4 have stated durations, or "tenors", such as 10 years, i. e., the contractual obligations last for a fixed number of years and end on a stated date in the future. Market participants typically buy or sell protection against the default of entities referenced in a CDS, CDX or tranche in an "over the counter" transaction (i.e., not on an exchange), by entering into a standardized swap agreement with a swap dealer or swap participant, many of whom are major financial institutions. Market participants who sell protection against the risk of default of the CDX or tranche reference entities are considered "long" risk and "short" protection and will collect premiums until the CDX reaches maturity. Market pmticipants who buy protection against the risk of default of the CDX or tranche reference entities are considered "short" risk and "long" protection" and must pay premiums until the CDX reaches maturity. As the end of 20 11 approached, the SCP contained sizeable long and Sh01t positions in many of the CDX high-yield and CDX investment grade series, among others, including both "on-the-run" series, which are the most-recently issued series, and "off-the-run" (i. e., no longer "on-the-run") series, and spanning multiple maturities and tranche positions. As of the end of 20 11, the SCP held more than $51 billion net notional of these credit derivatives. Also at the end of 20 11, in preparation for implementation of new standards on bank capital adequacy, stress testing, and market liquidity risks known as the Third Basel Accord (or "Basel III") and due to internal JPMorgan priorities, a decision was made to reduce the amount of risk -weighted assets ("R W A") held by SCP in order to free up additional capital. Unwinding certain positions in the SCP was one way to achieve the reduction. 2. The Valuation Process The CIO was required to record an estimate of the "fair value" of each position within the SCP - a process known as marking the book to market. The SCP was marked- to-market each day and at month-end. The month-end marks were far more significant to the CIO than the daily marks because the monthly marks were more widely rep01ted and used within JPMorgan than the daily marks. On a monthly basis, the SCP's mark-to-market valuations were reviewed by the Valuation Control Oroup ("VCO") within CIO, which price-tested the CIO's marks and compared them to mid-market prices, namely the mid-point between bid and offer prices. After the close of trading each month, one person from the CIO VCO had approximately three days to complete the VCO process, which included gathering information from dealer quotes and from Markit to determine a mid-market or "independent" price for each of the more than one hundred thirty positions included in the SCP, as well as all other CIO London-based portfolios. For the most part, the CIO VCO used the Markit price as its "independent" price for indices and used information from dealer quotes for tranche prices. The CIO VCO then applied a threshold (or tolerance) based on a multiple of bid- ask spreads observed from dealer quotes around its "independent," or mid-market, price to develop a "tolerance band" of acceptable prices for each position. SCP prices that were within the tolerance band were accepted without further review. To the extent that 5 there were discrepancies between the SCP marks and the "independent" prices used by VCG, the traders were given an opportunity to object and provide documentary evidence to support their marie. On a number of occasions, the VCG relented and adjusted its price based on this additional information provided by the SCP traders. For instance, at February 2012 month-end, the VCG's initial evaluation revealed that trader marks in the aggregate produced a value that was at least $31 million higher than the "independent" prices. Throughout the day on March 1, SCP traders sent the VCG additional dealer runs, and, by the end of the day, the difference was reduced to $11 million. The CIa VCO process focused solely on the individual prices of positions and did not consider the notional size of any position or the profit or loss resulting from the variances from the tolerance bands. 3. The Trading SCP traders were well aware that the marks they applied to their positions would be evaluated by VCO at month-end and that the month-end results for the SCP would be reported widely within JPMorgan. They were also aware that the VCO would compare the traders' marks to reported market prices and dealers' bids and offers in testing the accuracy of the marks. The larger the variation between market prices and the traders' marks, the more the traders' marks could be called into question.6 The SCP traders traded large and concentrated volumes of 109 lOY at the very end of February in the same direction as their existing positions - i. e., they were short protection and they sold more protection. This pattern of trading, which they sometimes referred to as "defending the position" or "fighting" market participants, was most evident on February 29,2012. Because of the large size of the SCP's 109 lOY position, relatively small favorable or adverse movements in the spreads at which the underlying product was traded in the market produced significant mark-to-market profits or losses on the positions. a. January In January 2012, the SCP traders began to buy additional large quantities of protection on HY indices in order to be better positioned for defaults and to balance those purchases by selling additional protection on 10 indices. The net result was the addition of positions to the SCP and an increasing notional value - the portfolio was growing. Because the SCP was Sh01i protection on the 109 lOY, as the price of protection decreased, the value of the SCP position increased. On January 25, the SCP sold its largest daily notional volume of protection in the 109 lOY up to that point-$2.777 billion worth-at an average spread of approximately 126.5 basis points (bps). The mark applied by the traders to that position was 123 bps, 3.5 bps points less than the spread at which they traded. The next day, January 26, SCP traders sold on net an additional $2.169 billion worth of 109 lOY protection at a lower average spread, approximately 6 As noted above at page 3, note 3, two SCP traders have been charged criminally and by the SEC based on allegations that they mis-marked the positions to deceive others at JPMorgan. The violation of the Act described in this Order, among other things, was consistent with a scheme to mis-mark. 6 120.64 bps. They marked the book on that day at 117.5 bps, which was slightly more than 3 bps lower than the traded spread level. That same day, following a conversation with the CIO manager overseeing the SCP, a junior SCP trader told other SCP traders that he believed the CIO manager wanted the traders "to fight a bit the positions." By January 30, the SCP traders were, in the words of one senior trader ("the Senior SCP Trader"), "in full fight here," referencing the desire to undertake various trading strategies due to the difficult trading environment and adverse price movements. On January 30, the SCP's traded spread on the IG9 lOY did, in fact, move adversely for the SCP inasmuch as it widened (increased) on that day to roughly 122.35 bps on average. Nevertheless, the traders raised the mark on the IG9 lOY to only 121 bps, which provided a difference between their mark and their trade level of approximately 1.32 bps. On the last trading day of the month, January 31, the Senior SCP trader explained to CIO management that he "tried to fight it in the last sessions and it was unsuccessful." As a result of the Senior SCP Trader's trading in the IG9 lOY during January, the SCP acquired positions that caused the portfolio to be bigger than it ever was. As a result of the SCP's January sales of protection in the IG 9 lOY, the notional short protection in the portfolio increased to $56 billion at the end of January, up from $36 billion at the end of 2011. By the end of January, the SCP had suffered year-to-date mark-to-market losses of $1 00 million, and SCP traders anticipated a further potential $300 million in losses for the yeal',? A member of CIO management in London acknowledged at the time that its strategies were not working and that the performance was "worrisome." b. February As February began, despite efforts to "defend the position" in the IG9 lOY, the SCP continued to suffer mark-to-market losses. The SCP traders were aware that the SCP had an outsize position: the Senior SCP trader had advised that "the notionals" were "becom[ing] scary," and the CIO should take losses ("full pain") now; he fm1her stated that these increased notionals would expose JPMorgan to "larger and larger drawdown pressure versus the risk due to notional increases." On a February 16 telephone call, a junior trader told the Senior SCP Trader to "look at the huge influence we have in credit . . . . " As month-end approached, the SCP's IG9 lOY position grew to a mammoth $65 billion in notional short risk from $56 billion at the end of January. On February 27,2012, the SCP sold on net roughly $1.08 billion notional value of protection in IG9 lOY at an average spread level of approximately 119 bps. The SCP marked this position at 115 bps, which differed from the trade level by 4 bps. On February 28, the SCP nearly doubled its previous day's sales, selling on net more than $2 billion of protection in IG9 lOY, which was among the five largest daily amounts ever sold by the SCP up to that point. The average trade price was close to 117 bps, but the 7 SCP was initially budgeted to make $30 million in profits for 2012. 7 SCP marked the position at 113.25 bps, i.e., roughly 3.5 bps less. c. February 29 The next day, February 29, the last day of trading for the month, the SCP sold on net an unprecedented $7.17 billion in protection in 109 lOY in outright trades, far and away the largest amount the CIO ever traded in one day, at an average trade spread of approximately 113.83 bps. Approximately $4.6 billion of the $7.17 billion in protection sold by the SCP on February 29 was sold during a three-hour period at the end of the trading day. The final position was marked at 112.5 bps that day, which provided the lowest difference in the month between traded spread levels and marks, at 1.3 bps. The SCP's volume ofl09 lOY protection sold on February 29 made up greater than 90% of the net market volume for the day, and accounted for approximately 15% of the net volume traded by the entire market for the entire month of February and approximately three times the average daily market volume. Measured another way, the amount of protection the SCP sold on February 29 was nearly 11 times the SCP's own average daily volume for the rest of February. On the evening of February 29, the Senior SCP trader explained to the manager who oversaw SCP trading that the day's sale of this large amount of protection in the 109 lOY was related to "month end price moves that were all adverse, although we could limit the damage." D. The Commission's New Supervision and Control Rules The Dodd-Frank Act amended the Act to provide the Commission with authority to regulate swap dealers like lPMorgan and the swap transactions that are the subject of this Order. Specifically, Section 4s was added to the Act to require swap dealers and major swap participants to register. Section 4s also imposed specific regulatory requirements for effective risk management, supervision, and transparency in swap dealing activities. Those new requirements authorized the Commission to adopt regulations to implement the requirements of Section 4s. To that end, the Commission has adopted numerous swap transaction and swap dealer regulations that became effective subsequent to the events that are the subject of this Order. lPMorgan's practices during early 2012 would have been covered by the requirements that are now applicable to registered swap dealers like lPMorgan, who registered as a swap dealer effective December 31, 2012. Of particular relevance to lPMorgan's conduct here are Regulations 23.600 through 23.607, 17 C.F.R. §§ 23.600-23.607 (2013), which impose a range of duties on swap dealers and major swap participants with regard to, among other things: (1) risk management procedures; (2) monitoring of trading to prevent violations of applicable position limits; (3) diligent supervision; and (4) conflicts of interest policies and procedures. In addition, the Commission promulgated Regulations 23.200 through 23 .205, 17 C.F.R. §§23.200-23 .205 (2013), which set forth reporting and recordkeeping 8 . requirements and daily trading records requirements for swap dealers and major swap patiicipants. 8 If the new regulations had been in effect during early 2012, JPMorgan would have been in a better position to detect the risks in the SCP sooner and manage them effectively. For example, Regulation 23.602(a) requires swap dealers and major swap participants to develop and implement a system to diligently supervise all activities related to their business, and to do so in a manner reasonably designed to achieve compliance with the Act and the Regulations promulgated thereunder. JPMorgan's supervision of the SCP was inadequate as demonstrated by the fact that the trading limits imposed were routinely breached with little repercussion and without adequate analysis of the causes of the breaches. JPMorgan has acknowledged in filings with the SEC that as of March 31, 2012, it had a material weakness in its internal controls over financial reporting with respect to the effectiveness of the CIa's internal controls over valuation of the SCPo In addition, the persons responsible for overseeing the CIa were disconnected from the day-to-day activities of the CIa in London. JPMorgan's management of the SCP's risk during the first quarter of2012 was wholly inconsistent with principles of sound risk management-principles that have been incorporated into many of the risk management provisions of Regulations 23.600 through 23.607. Indeed, had the regulations been in place, much of the offending conduct at issue (and the significant losses it caused) may well have been detected and remedied internally much more quickly, thereby potentially reducing losses. For example, Regulation 23.600(b)(5) requires that a firm's risk management unit have sufficient authority, personnel and resources to carry out a risk management program. The risk management unit must also be independent from the business trading unit. During the first quarter of 2012, the CIa risk function was understaffed, and risk managers were not expected, encouraged or supported sufficiently by CIa management to vigorously question and challenge SCP trading strategies. Furthermore, Regulation 23.600(b)(1) requires swap dealers to establish, document, maintain, and enforce a system of risk management policies and procedures that complies with the prescriptive requirements of the Act and the Commission's Regulations. Although JPMorgan had a system of risk management policies and procedures for the CIa's swaps trading in the SCP, the system had ineffective controls, which resulted in a failure to maintain and enforce the risk management system adequately. For example, the CIa Risk Management Committee did not meet regularly during the first quarter of 2012, and did not devote adequate attention to the risks in the SCPo 8 These Commission regulations became effective on June 2, 2012, and JPMorgan provisionally registered as a swap dealer on December 31, 2012. Upon registration, JPMorgan became subject to the Commission's swap-dealer rules. Because the offending conduct occurred in the first two quarters of2012, prior to JPMorgan's registration, the Commission does not make a finding as to whether JPMorgan violated any of such rules. 9 Also included in the Commission's risk-management program requirements are Regulations 23.600(c)(1)-(2), which establish a swap dealer's obligation to (1) identify risks and risk tolerance limits, (2) provide its senior management, governing body, and the Commission with regular risk exposure repOlis, and (3) immediately notify its senior management and governing body upon detection of any material change in risk exposure. The CIO frequently violated the established risk limits with no repercussions and inadequate analysis. When limit breaches did occur, the CIO attempted to change the methodology used to calculate the variables included in the limit or simply increased the limit, without informed approval. In short, when the CIO's conduct failed to conform to lPMorgan's risk management policies, the institutional response was not to inform senior management or the firm's governing body, but rather to change the policies and procedures without consulting senior management. Regulations 23.600(d)(3) and (4) require that swap dealers and major swap pmiicipants establish specific quantitative and qualitative limits for traders and monitor each trader throughout the day to prevent the trader from exceeding those limits. Prior to the effective date of the regulations, lPMorgan imposed no limits on the notional size of trades for the SCP and had no system for monitoring limits on an intraday basis during the first quarter of2012. Another way that senior management can be kept informed of changes in risk as it occurs is by establishing appropriate risk parameters. Ensuring that those parameters are followed can be accomplished by procedures requiring regular and frequent calculation of those parameters. Regulation 23.600(c)(4)(i)(A) requires that a registrant's market risk policies explicitly take into account daily measurement of market exposure, including position concentration. CIO management lacked a full understanding of the SCP's position concentration in the IG9 lOY in 2012. During the first qumier of2012, the CIO's risk managers failed to adequately measure the risk in CIO's market position. Similarly, Regulation 23.600(c)(2) now requires that risk exposure repOlis be generated and provided to the governing body immediately upon detection of any material changes to risk exposure. lPMorgan's governing body did not receive a single notification regarding the size of or the risks imposed by the SCP during the first quarter of 20 12- and it only received a notification as to certain of the risks thereafter because the press began calling the firm in preparation for publication of a new report of the lPMorgan "London Whale." This was far too late for effective intervention. The foregoing is not an exhaustive analysis of all of the ways in which the Commission's new swap dealer rules, ifin effect and fully implemented during the first quarter of 20 12, could have detected and/or prevented the deficiencies and reduced the losses suffered by lPMorgan. However, even this summary makes apparent the need for such swap dealer rules and regulations. 10