Quick Facts
Overview
The CFTC imposed a $5 million civil monetary penalty on UBS AG, UBS Financial Services Inc., and UBS Securities LLC for failing to diligently supervise their trade surveillance programs from 2015 to 2024.
The violations stemmed from deficiencies in a third-party surveillance tool that affected monitoring of foreign exchange, precious metals, rates, and credit products, as well as gaps in surveillance for certain exchange-traded derivatives on ICE venues.
UBS self-disclosed some issues and has implemented remediation measures.
Details of the Case
The CFTC found that UBS, as a registered swap dealer and futures commission merchant, did not maintain effective controls to monitor trading activity in CFTC-regulated products. This included electronic foreign exchange (FX), precious metals (PM), rates, and credit products (collectively FRC).
The issues arose primarily from problems with a third-party automated surveillance tool implemented at the end of 2017, which was designed to detect market conduct risks such as off-market trades, wash trading, ramping, front running, insider dealing, suspicious volume, and layering/spoofing.
Deficiencies in the tool's configuration, operation, and data handling led to persistent surveillance gaps over several years. Additionally, surveillance lapses occurred for certain client types on three ICE trading venues, where trade data failed to flow into UBS's monitoring systems. UBS identified and self-reported the ICE gaps in February 2025.
The CFTC determined these failures violated requirements for diligent supervision under the Commodity Exchange Act and related regulations. UBS has since remediated by enhancing governance, implementing new risk assessments, migrating to alternative tools, and conducting lookbacks with third-party consultants.
WORKED EXAMPLES
Alert Generation Deficiencies
Issues with the third-party tool's alert logic, data logic, and market data integration resulted in a high volume of unproductive and false alerts, limiting detection of disruptive trading. This contributed to ineffective surveillance of FRC products, with gaps persisting for several years after implementation in late 2017.
- Impact: Reduced ability to identify risks like spoofing or front running.
- Quantitative detail: Based on UBS's sample assessment, surveilled FRC trading was only a small proportion of the Investment Bank's overall volume.
Data Storage Limitations
The tool's configuration removed trade data after 180 days, causing automatic closure and deletion of unreviewed alerts.
- Impact: Prevented thorough review of potential misconduct in older trades.
- Quantitative detail: Alerts older than 180 days were deleted without review, affecting surveillance of CFTC-regulated products from 2017 onward.
Settings Change in FX and PM Portfolios
In approximately March 2020, settings were altered, turning off monitoring for most electronic FX and all electronic PM portfolios across several market conduct scenarios.
- Impact: Eliminated surveillance for key risks in these asset classes.
- Quantitative detail: Affected portfolios remained unmonitored until remediation began in 2023.
ICE Venue Data Flow Gaps
For certain client categories, trade data from three ICE venues did not flow into UBS's surveillance tools during the 2015-2024 period.
- Impact: Left exchange-traded derivatives unmonitored for U.S. clients.
- Quantitative detail: Impacted trade volume by U.S. clients was less than 1% of UBS's total flow on these venues from 2018 to 2024.
Organizational and Governance Delays
The prior structure of UBS's Monitoring, Surveillance and Controls function concentrated responsibilities in one team, leading to ineffective information-sharing and delays in correcting issues.
- Impact: Allowed FRC surveillance gaps to persist for years.
- Quantitative detail: Deficiencies identified but not fully addressed until the Market Conduct Remediation Program launched in May 2023.
Fines and Penalties
The total fine is a $5,000,000 civil monetary penalty, payable jointly and severally by the respondents, with post-judgment interest accruing on any unpaid portion.
Key Quotes
"UBS did not implement a fully effective surveillance program for trading activity in certain CFTC-regulated products, including electronic Foreign Exchange (“FX”) and Precious Metals (“PM”), Rates, and Credit products (collectively, “FRC”)." (From the CFTC's summary of findings.)
"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." (From the CFTC's legal discussion, citing prior consent orders.)
"The inadequacy of UBS’s supervisory system is demonstrated by, among other things, the trading activity that was not surveilled; that the gaps concerned surveillance of multiple products; and that UBS did not timely detect and correct the gaps." (From the CFTC's legal discussion on UBS AG's violations.)
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