For the fourth time in recent years, the Commodities Futures Trading Commission has taken action for the manipulation of the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX).
The most recent action was taken against the Royal Bank of Scotland.
“The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against The Royal Bank of Scotland plc (RBS) for attempted manipulation of the ISDAFIX benchmark and requiring RBS to pay an $85 million civil monetary penalty. The CFTC Order finds that over a five-year period, beginning in January 2007 and continuing through March 2012 (relevant period), RBS, through the acts of multiple traders, attempted to manipulate the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX), a global benchmark reference in a range of interest rate products. RBS engaged in the unlawful conduct in order to benefit certain derivatives positions it held that were priced or valued off of the USD ISDAFIX benchmark,” a press release from the CFTC stated.
This continues a troubling trend of some of the world’s largest banks and investment banks having attempted the same thing.
In December 2016, the CFTC found that Goldman Sachs had from 2007-2012 attempted to manipulate the same index, in May 2016, it was Citibank, and in 2014, it was JP Morgan Chase fined for the same thing.
“People around the world rely on benchmark rates such as ISDAFIX. This is our fourth enforcement action relating to attempts to manipulate the ISDAFIX. These actions, and the CFTC’s previous cases against those who sought to corrupt the LIBOR and foreign exchange benchmark rates, make clear that the Commission takes very seriously its role in ensuring the integrity of any and all benchmarks used in our markets,” said Aitan Goelman, Director of the CFTC’s Division of Enforcement.
First developed in 1998, the USD ISDAFIX is a benchmark which “represents the mid-price for interest rate swaps (the fixed leg), at particular times of the day, in three major currencies (EUR, GBP and USD) and in tenors ranging from 1 year to 30 years. ICE Swap Rate is used as the exercise value for cash-settled swaptions, for close-out payments on early terminations of interest rate swaps, for some floating rate bonds and for valuing portfolios of interest rate swaps,” according to its page on the ICE exchange.
Along with the CFTC, Britain’s Financial Conduct Authority (FCA) has also placed an emphasis on investigating manipulation of this rate.