In the Matter of: 

UNITED STATES OF AMERICA 

Before the 

COMMODITY FUTURES TRADING COMMISSION 

The Northern Trust Company, 

Respondent. 

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) CFTC Docket No. 19-39 

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ORDER INSTITUTING PROCEEDINGS PURSUANT TO 

SECTION 6(c) AND (d) OF THE COMMODITY EXCHANGE ACT, 

MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS 

I. INTRODUCTION 

The Commodity Futures Trading Commission ("Commission") has reason to believe that 

from 2013 through at least 2018 (the "Relevant Period"), The Northern Trust Company 

("Northern Trust," "Respondent," or the "Bank") violated Sections 2(a)(13) and 4r(a)(3) of the 

Commodity Exchange Act ("Act"), 7 U.S.C. § 2(a)(l3), 6r(a)(3) (2012), and Commission 

Regulations ("Regulations") 43.3, 45.3, and 45.4, 17 C.F.R. § 43.3, 45.3, 45.4 (2019), and 

Section 4s(h)(l)(B) of the Act, 7 U.S.C. § 6s(h)(l)(B) (2012), and Regulation 23.602, 17 C.F.R. 

§ 23 .602 (2019). Therefore, the Commission deems it appropriate and in the public interest that 

public administrative proceedings be, and hereby are, instituted to determine whether 

Respondent engaged in the violations set forth herein and to detennine whether any order should 

be issued imposing remedial sanctions. 

In anticipation of the institution of an administrative proceeding, Respondent has 

submitted an Offer of Settlement ("Offer"), which the Commission has determined to accept. 

Without admitting or denying any of the findings or conclusions herein, Respondent consents to 

the entry of this Order Instituting Proceedings Pursuant to Section 6( c) and ( d) of the Act, 

Making Findings, and Imposing Remedial Sanctions ("Order"), and acknowledges service of this 

Order. 1 

1 Respondent consents to the use of the findings of fact and conclusions of law in this Order in this proceeding and 

in any other proceeding brought by the Commission or to which the Commission is a party or claimant, and agrees 

that they shall be taken as true and correct and given preclusive effect therein, without further proof. Respondent 

does not consent, however, to the use of this Order, or the findings or conclusions herein, as the sole basis for any 

other proceeding brought by the Commission or to which the Commission is a party, other than: a proceeding in 

bankruptcy or receivership; or a proceeding to enforce the terms of this Order. Respondent does not consent to the 

use of the Offer or this Order, or the findings or conclusions in this Order, by any other party in any other 

proceeding. 
II. FINDINGS 

The Commission finds the following: 

A. SUMMARY 

Reporting is at the heart of the Commission's market and financial surveillance 

programs, which are critical to the Commission's mission to protect market participants and 

promote market integrity. Accurate swap data is thus essential to effective fulfillment of the 

regulatory functions of the Commission, including meaningful surveillance and enforcement 

programs. 

During the Relevant Period, Northern Trust failed to report hundreds of thousands of 

swaps to a swap data repository ("SDR") consistent with the requirements of the Act and 

Regulations. These swap reporting failures were a direct result of the failure of Northern Trust 

to adequately supervise its swap dealer, including failing to hire qualified subject matter experts 

to ensure swap dealer compliance. 

In accepting Respondent's Offer of Settlement, the Commission recognizes Northern 

Trust's substantial cooperation during the Division of Enforcement's ("Division") investigation 

of this matter. The Commission notes that Northern Trust's cooperation and remediation are 

recognized in the form of a substantially reduced civil monetary penalty. 

B. RESPONDENT 

Northern Trust is an Illinois banking corporation, provisionally registered as a swap 

dealer ("SD") with the Commission on April 30, 2013. 

C. FACTS 

1. Northern Trust's Failure To Report Swap Transactions to an SDR. 

Northern Trust, as an SD, was a reporting counterparty required to report certain data 

about its swaps transactions to an SDR. See Sections 2(a)(13)(G) and 4r(a)(3) of the Act, 7 

U.S.C. § 2(a)(13)(G), 6r(a)(3) (2012); Regulations 43.3, 45.3, and 45.4 17 C.F.R. §§ 43.3, 45.3, 

45.4 (2019). 

During the Relevant Period, Northern Trust did not implement sufficient processes and 

controls to ensure that all of its SDR reporting was accurate and complete. 

As a result of these control failures, Northern Trust on hundreds of thousands of 

occasions failed to report certain swap transactions to an SDR consistent with the requirements 

of Section 2(a)(13)(G) and 4r(a)(3) of the Act and Regulations 43.3, 45.3, and 45.4. 

From 2013 through at least 2018, Northern Trust routinely failed to report interest rate 

derivatives trades as required by the Act and Regulations. The reporting failures included failing 

to provide real-time reports, failing to report required life-cycle events (such as full or partial 

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trade termination), failing to report primary economic terms, and failing to provide accurate 

confirmation data. 

From at least 2015 through at least 2018, Northern Trust reported incorrect execution 

times for hundreds of thousands of swaps. This occurred because Northern Trust lacked the 

technological ability to report execution times by trading venue and, instead of upgrading its 

technology, reported the time at which its systems recorded the trade, which often was later than 

the execution time. 

From 2015 through at least 2017, Northern Trust failed to timely report thousands of 

foreign exchange ("FX") swap transactions. 

From 2017 through at least 2018, Northern Trust reported the two legs ofFX swap 

transactions as if they were separate transactions ( and did not report that these two legs 

constituted a single swap transaction). 

From 2015 through at least 2018, for trades involving allocation, Northern Trust failed to 

report thousands of initial swap transactions (it reported the allocated swaps but not the initial 

transaction). 

Northern Trust's swap reporting was also deficient in other ways during the Relevant 

Period. 

Northern Trust's SDR reporting failures violated Section 2(a)(13)(G) and 4r(a)(3) of the 

Act and Regulations 43.3, 45.3, and 45.4. 

2. Northern Trust's Inadequate Supervision of Its Swap Dealer 

During the Relevant Period, Northern Trust management routinely failed to supervise its 

SD's activities, in violation of Section 4s(h)(l)(B) of the Act, 7 U.S.C. § 6s(h)(l)(B) (2012), and 

Regulation 23.602, 17 C.F.R. § 23.602 (2019). 

Beginning with the inception of the SD in 2013, Northern Trust failed to adequately 

ensure the SD's compliance with the Act and Regulations. This failure was especially notable 

with respect to swap reporting, where the SD's failure to devote adequate attention and resources 

to reporting solutions resulted in a variety of different reporting problems. Contributing to the 

failure to supervise was that Northern Trust repeatedly hired compliance personnel for the SD 

who possessed some financial industry and regulatory experience, but lacked the specific 

technical expertise necessary to ensure SD compliance. 

This failure to supervise the SD resulted in hundreds of thousands of violations of the Act 

and Regulations. 

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3. Northern Trust's Cooperation with the Division of Enforcement's 

Investigation 

Throughout the Division's investigation, Northern Trust provided substantial 

cooperation. Among other things, Northern Trust conducted an internal investigation and 

provided specific and detailed information to the Division regarding the reporting deficiencies its 

internal investigation revealed. Northern Trust also retained outside consultants to review its 

swap dealer's processes and procedures. In addition, Northern Trust has hired new personnel to 

oversee compliance at its swap dealer and has taken substantial steps to improve its processes for 

swap reporting going forward. 

III. LEGAL DISCUSSION 

A. Northern Trust's Failure To Report Swap Transactions to an SDR Violated 

Sections 2{a)(13){G) and 4r{a){3) of the Act and Regulations 43.3, 45.3, and 45.4 

Sections 2(a)(13)(G) and 4r(a)(3) of the Act, 7. U.S.C. § 2(a)(13)(G), 6r(a)(3) (2012), 

requires that swaps, both cleared and uncleared, be reported to a SDR, and establishes 

requirements for such reporting. These sections of the Act and the Commission's implementing 

regulations in Parts 43 and 45 of the Regulations, 17 C.F.R. pts. 43, 45 (2019), were designed to 

enhance transparency, promote standardization, and reduce systemic risk. The accuracy and 

completeness of swap reporting are critical to the Commission's mission to protect market 

participants and to ensure market integrity. See, e.g., In re Ice Futures US., CFTC No. 15-17, 

2015 WL 1276463 (Mar. 16, 2015) (consent order). 

Among the requirements of the Act and Regulations related to swap reporting, Part 43 

establishes requirements for the real-time reporting and public availability of swap transaction 

data. See Regulations 43.2 and 43.3, 17 C.F.R. §§ 43.2, 43.3 (2019). Regulation 43.3 requires 

that reporting parties must report a publicly-reportable swap transaction to a SDR as soon as 

technologically practicable after the swap transaction is executed. 

Part 45 of the Regulations requires reporting parties to, among other things, report swap 

creation data to a SDR. Regulation 45.3, 17 C.F.R. § 45.3 (2019), sets forth the requirements for 

reporting creation data, including primary economic terms data and confirmation data. See 17 

C.F.R. § 45.3(b), (c). Regulation 45.4 sets forth requirements for continuation data reporting, 

which includes reporting ofrequired life-cycle events. See 17 C.F.R. § 45.4. 

From 2013 through 2018, Northern Trust experienced recurring issues with SDR 

reporting and failed to properly report swap transactions to an SDR in violation of Sections 

2(a)(13)(G) and 4r(a)(3) of the Act and Regulations 43.3, 45.3, and 45.4. 

B. Northern Trust's Inadequate Supervision of Its Swap Dealer Violated Section 

4s{h)(l){B) of the Act and Regulation 23.602 

Section 4s(h)(l)(B) of the Act, 7 U.S.C. § 6s(h)(l)(B) (2012), requires "diligent 

supervision of the business of the registered swap dealer." Regulation 23.602, 17 C.F.R. 

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§ 23 .602 (2019), requires that SDs and major swap participants "establish and maintain a system 

to supervise, and shall diligently supervise, all activities relating to its business performed by its 

partners, members, officers, employees, and agents ( or persons occupying a similar status or 

performing a similar function)." 

The operative language of Regulation 23.602 (governing SDs and major swap 

participants), is similar to the language of the Commission's longstanding supervision regulation 

for futures and options, Regulation 166.3, 17 C.F.R. § 166.3 (2019). Under Regulation 166.3, 

when a registrant's supervisory system is generally inadequate, or the registrant fails to perform 

its supervisory duties diligently, that fact alone is sufficient to establish a violation of the 

supervision requirement. See, e.g., In re Murlas Commodities, Inc., CFTC No. 85-29, 1995 WL 

523563, at *9 (Sept. 1, 1995); In re Paragon Futures Ass 'n, CFTC No. 88-18, 1992 WL 74261, 

at * 14 (Apr. 1, 1992). Evidence of violations that "should be detected by a diligent system of 

supervision, either because of the nature of the violations or because the violations have occurred 

repeatedly" is probative of a failure to supervise. Paragon Futures, 1992 WL 74261, at *14. 

From the swap dealer's inception until at.least 2017, Northern Trust failed to hire SD 

compliance personnel with adequate subject matter expertise. As a result, throughout the 

Relevant Period, Northern Trust's management failed to diligently supervise the SD. The failure 

had a systemic impact on Northern Trust's swaps operations and occurred over a long period of 

time. Management's failure to supervise the SD directly resulted in violations of other 

provisions of the Act and accompanying Regulations. Accordingly, Northern Trust's conduct 

violated Section 4s(h)(l)(B) of the Act and Regulation 23.602. 

C. Northern Trust's Liability for the Acts of Its Employees 

Section 2(a)(l)(B) of the Act, 7 U.S.C. § 2(a)(l)(B) (2012), and Regulation 1.2, 17 

C.F.R. § 1.2 (2019), provide that the act, omission, or failure of any official, agent, or other 

person acting for any individual, association, partnership, corporation, or trust within the scope 

of his employment or office shall be deemed the act, omission, or failure of such individual, 

association, partnership, corporation, or trust. Pursuant to Section 2(a)(l)(B) of the Act and 

Regulation 1.2, strict liability is imposed on principals for the actions of their agents. See, e.g., 

Dahmen-Ramirez & Wellington Advisory, Inc. v. CFTC, 837 F.2d 847, 857-58 (9th Cir. 1988); 

Rosenthal & Co. v. CFTC, 802 F.2d 963, 966 (7th Cir. 1986). 

The foregoing acts, omissions, and failures of Northern Trust's employees occurred 

within the scope of their employment, office, or agency with Northern Trust; therefore, pursuant 

to Section 2(a)(l)(B) of the Act, and Regulation 1.2, Northern Trust is liable for those acts, 

omissions, and failures in violation of the Act and Regulations. 

IV. FINDINGS OF VIOLATIONS 

Based on the foregoing, the Commission finds that Respondent violated Sections 2(a)(13) 

and 4r(a)(3) of the Act, 7 U.S.C. §§ 2(a)(13), 6r(a)(3) (2012), and Regulations 43.3, 45.3 and 

45.4, 17 C.F.R. § 43.3, 45.3, 45.4 (2019), and Section 4s(h)(l)(B) of the Act, 7 U.S.C. 

§ 6s(h)(l)(B) (2012), and Regulation 23.602, 17 C.F.R. § 23.602 (2019). 

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V. OFFER OF SETTLEMENT 

Respondent has submitted the Offer in which it, without admitting or denying the 

findings and conclusions herein: 

A. Acknowledges receipt of service of this Order; 

B. Admits the jurisdiction of the Commission to all the matters set forth in this Order and for 

any action or proceeding brought or authorized by the Commission based on a violation 

of or enforcement of this Order; 

C. Waives: 

1. The filing and service of a complaint and notice of hearing; 

2. A hearing; 

3. All post-hearing procedures; 

4. Judicial review by any court; 

5. Any and all objections to the participation by any member of the Commission's 

staff in the Commission's consideration of the Offer; 

6. Any and all claims that it may possess under the Equal Access to Justice Act, 5 

U.S.C. § 504 (2012) and 28 U.S.C. § 2412 (2012), and/or the rules promulgated 

by the Commission in conformity therewith, Part 148 of the Regulations, 

1 7 C.F .R. pt. 148 (2019), relating to, or arising from, this proceeding; 

7. Any and all claims that it may possess under the Small Business Regulatory 

Enforcement Fairness Act of 1996, ("SBREFA"), Pub. L. No. 104-121, tit. II, 

§ § 201-25 3, 110 Stat 84 7-7 4 ( codified as amended in scattered sections of 5 

U.S.C. and 15 U.S.C.), relating to, or arising from, this proceeding; and 

8. Any claims of Double Jeopardy based upon the institution of this proceeding or 

the entry in this proceeding of any order imposing a civil monetary penalty or any 

other relief, including this Order; 

D. Stipulates that the record basis on which this Order is entered shall consist solely of the 

findings contained in this Order to which Respondent has consented in the Offer; and 

E. Consents, solely on the basis of the Offer, to the Commission's entry of this Order that: 

1. Makes findings by the Commission that Respondent violated Sections 2(a)(13) 

and 4r(a)(3) of the Act, 7 U.S.C. §§ 2(a)(13), 6r(a)(3) (2012), and Regulations 

43.3, 45.3 and 45.4, 17 C.F.R. §§ 43.3, 45.3, 45.4 (2019), and Section 4s(h)(l)(B) 

of the Act, 7 U.S.C. § 6s(h)(l)(B) (2012), and Regulation 23.602, 17 C.F.R. 

§ 23.602 (2019); and 

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2. Orders Respondent to cease and desist from violating Sections 2(a)(13) and 

4r(a)(3) of the Act and Regulations 43.3, 45.3, and 45.4 and Section 4s(h)(l)(B) 

of the Act and Regulation 23.602; and 

3. Orders Respondent to pay a civil monetary penalty in the amount of one million 

dollars ($1,000,000), plus post-judgment interest within ten days of the date of 

entry of this Order; and 

4. Orders Respondent and its successors and assigns to comply with the conditions 

and undertakings consented to in the Offer and set forth in Part VI of this Order. 

Upon consideration, the Commission has determined to accept the Offer. 

VI. ORDER 

Accordingly, IT IS HEREBY ORDERED THAT: 

A. Respondent shall cease and desist from violating Sections 2(a)(13) and 4r(a)(3) of the 

Act, 7 U.S.C. §§ 2(a)(13), 6r(a)(3) (2012), and Regulations 43.3, 45.3, and 45.4 17 C.F.R. 

§§ 43.3, 45.3, 45.4 (2019), and Section 4s(h)(l)(B) of the Act, 7 U.S.C. § 6s(h)(l)(B) 

(2012), and Regulation 23.602, 17 C.F.R. § 23.602 (2019). 

B. Respondent shall pay a civil monetary penalty in the amount of one million dollars 

($1,000,000), ("CMP Obligation"). If the CMP Obligation is not paid in full within ten 

days of the date of entry of the Order, then post-judgment interest shall accrue on the 

CMP Obligation beginning on the date of entry of the Order and shall be determined by 

using the Treasury Bill rate prevailing on the date of entry of the Order pursuant to 

28 u.s.c. § 1961 (2012). 

Respondent shall pay the CMP Obligation and any post-judgment interest by electronic 

funds transfer, U.S. postal money order, certified check, bank cashier's check, or bank 

money order. If payment is to be made other than by electronic funds transfer, 

Respondent shall make the payment payable to the Commodity Futures Trading 

Commission, and sent to the address below: 

MMAC/ESC/ AMK326 

Commodity Futures Trading Commission 

Division of Enforcement 

6500 S. MacArthur Blvd. 

HQ Room 181 

Oklahoma City, OK 73169 

( 405) 954-6569 office 

(405) 954-1620 facsimile 

9-AMC-AR-CFTC@faa.gov 

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If payment is to be made by electronic transfer, Respondent shall contact Marie Thome 

or her successor at the above address to receive payment instructions and shall fully 

comply with those instructions. Respondent shall accompany payment of the CMP 

Obligation with a cover letter that identifies Respondent and the name and docket number 

of this proceeding. Respondent shall simultaneously transmit copies of the cover letter 

and the form of payment to the Chief Financial Officer, Commodity Futures Trading 

Commission, Three Lafayette Centre, 1155 21st Street, NW, Washington, D.C. 20581. 

C. Respondent and its successors and assigns shall comply with the following conditions 

and undertakings set forth in the Off er: 

1. Remediation: Respondent will continue to implement and improve its internal 

controls and procedures in a manner reasonably designed to ensure the accuracy 

and integrity of its swaps reporting, to remediate the currently known swap 

reporting deficiencies that are the subject matter of this Order. Specifically, 

Respondent undertakes to: 

a. Enhance Respondent's supervisory program, policies, procedures and 

controls in a manner reasonably designed to ensure compliance with the 

reporting requirements of Section 2(a)(13) and 4r(a)(3) of the Act and 

Parts 43 and 45 of the Regulations, 17 C.F.R. pts. 43, 45 (2019); and, 

b. Provide additional training to relevant personnel on the reporting 

requirements of Section 2(a)(13) and 4r(a)(3) of the Act and Parts 43 and 

45 of the Regulations. 

2. Compliance with Undertakings: Within 120 days of the entry of this Order, 

Respondent shall make a report to the Division explaining its progress towards 

compliance with the Undertakings set forth herein. Within one year of the entry 

of this Order, Respondent shall submit a report to the Division, explaining how it 

has complied with the Undertakings set forth herein. The report shall attach 

copies of and describe the internal controls, policies and procedures that have 

been designed and implemented to satisfy the Undertakings, along with a report 

on the status of the remediation efforts. 

3. Public Statements: Respondent agrees that neither it nor any of its successors or 

assigns, agents or employees under its authority or control shall take any action or 

make any public statement denying, directly or indirectly, any findings or 

conclusions in this Order or creating, or tending to create, the impression that this 

Order is without factual basis; provided, however, that nothing in this provision 

shall affect Respondent's: (i) testimonial obligations; or (ii) right to take legal 

positions in other proceedings to which the Commission is not a party. 

Respondent and its successors and assigns shall undertake all steps necessary to 

ensure that all of its agents and/or employees under its authority or control 

understand and comply with this agreement. 

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D. 

E. 

Cooperation, in General: Respondent shall cooperate fully and expeditiously with the 

Commission, including the Commission's Division, and any other governmental agency 

in this action, and in any investigation, civil litigation, or administrative matter related to 

the subject matter of this action or any current or future Commission investigation related 

thereto for a period of three years. As part of such cooperation, Respondent agrees to: 

1. preserve and produce to the Commission in a responsive and prompt manner, as 

requested by the Division's staff, all non-privileged documents, information, and 

other materials wherever located, subject to applicable laws and regulations, in 

the possession, custody, or control of Respondent; 

2. accept service by mail, electronic mail, or facsimile transmission of notices or 

subpoenas for documents and/or testimony at depositions, hearings, or trials; 

3. appoint Respondent's attorney as agent to receive service of such notices and 

subpoenas; and 

4. waive the territorial limits on service contained in Rule 45 of the Federal Rules of 

Civil Procedure and any applicable local rules in connection with requests or 

subpoenas of the Division's staff. 

Partial Satisfaction: Respondent understands and agrees that any acceptance by the 

Commission of any partial payment of Respondent's CMP Obligation shall not be 

deemed a waiver of its obligation to make further payments pursuant to this Order, or a 

waiver of the Commission's right to seek to compel payment of any remaining balance. 

The provisions of this Order shall be effective on this date. 

By the Commission. 

Secretary of the Commission 

Commodity Futures Trading Commission 

Dated: September 30, 2019 

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