JPMorgan Chase Bank, N.A. has settled with U.S. regulators, and agreed to pay a US$100 million fine, in connection with its so-called “London Whale” trades, which caused billions in losses for the bank.

The U.S. Commodity Futures Trading Commission (CFTC) issued an order against JPMorgan Wednesday settling charges that it manipulated markets in connection with its trading of certain credit default swaps (CDS). The CFTC says that by selling “a staggering volume of these swaps in a concentrated period”, the bank “recklessly disregarded the fundamental precept on which market participants rely, that prices are established based on legitimate forces of supply and demand.”

As a result, the CFTC found that the bank had violated derivatives laws, as amended by the U.S. regulatory reforms known as Dodd-Frank. JPMorgan admitted certain findings in the CFTC’s order, including that its traders acted recklessly; and, it agreed, among other things, to pay a US$100 million civil monetary penalty.

The violation charged by the CFTC relates to the bank’s trading of one particular credit default index, where it had a net short position of US$65 billion at one point. The CFTC says that the bank’s traders resolved to defend that position ahead of month-end marks, and did so by selling more than US$7 billion of the index in one day, including HS$4.6 billion that was sold during a three-hour period towards the end of the day. This amounted to more than 90% of the day’s net volume traded by the entire market, and 15% of the month’s net volume.

The CFTC found that the trading strategy to ‘defend the position’, “constituted a manipulative device employed by the traders in reckless disregard of the possible consequences of their conduct, including obvious dangers to legitimate market forces.”

In addition to paying a US$100 million penalty, JPMorgan must continue to implement written enhancements to its supervisory and control systems for swaps trading. The CFTC acknowledged that JPMorgan cooperated with its investigation.

“In Dodd-Frank, Congress provided a powerful new tool enabling the CFTC for the first time to prohibit reckless manipulative conduct,” said David Meister, the CFTC’s director of enforcement. “As this case demonstrates, the commission is now better armed than ever to protect the market from traders, like those here, who try to ‘defend’ their position by dumping a gargantuan, record-setting, volume of swaps virtually all at once, recklessly ignoring the obvious dangers to legitimate pricing forces.”