CFTC Nails Deutsche Bank's Securities Division in Swap Manipulation Scheme - The Industry Spread

Michael Volpe

After spending a decade in finance, Michael Volpe has been a freelance investigative journalist since 2009. His work has been published locally in the Chicago Reader, Chicago Crusader, Chicago Heights Patch, and New City. Nationally, Volpe's work has appeared in a wide variety of publications including the Washington Examiner, the Daily Caller, Crime Magazine, the Southern Christian Leadership Conference Newsletter, and Counter Punch. Volpe has been recognized by whistleblowers as leading the charge in getting their stories out. His first book Prosecutors Gone Wild was published in October 2012, his second book The Definitive Dossier of PTSD in Whistleblowers was published in February 2013 and his third book Bullied to Death was published in August 2015.

Deutsche Bank

CFTC Nails Deutsche Bank’s Securities Division in Swap Manipulation Scheme

February 6, 2018

CFTCThe Commodities Futures Trading Commission has caught a top European bank manipulating derivatives the second time in less than a week.

The CFTC announced they were settling with Deutsche Bank Securities Inc, a division of Deutsche Bank, for $70 million for that bank’s manipulation of the ISDAFIX benchmark swap rate. Here’s part of CFTC’s statement.

“The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Deutsche Bank Securities Inc. (DBSI) for attempted manipulation of the ISDAFIX benchmark and requiring DBSI to pay a $70 million civil monetary penalty.

“The CFTC Order finds that over a five-year period, beginning in at least January 2007 and continuing through May 2012 (the Relevant Period), DBSI made false reports and through the acts of multiple traders attempted to manipulate the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX), a leading global benchmark referenced in a range of interest rate products, to benefit its derivatives positions, including positions involving cash-settled options on interest rate swaps.”

James McDonald, the CFTC Director of Enforcement, stated: “This action reflects the CFTC’s continued and vigilant commitment to protect those who rely on the integrity of critical financial benchmarks. There is no room in our markets for manipulation—we will continue to work hard to stamp it out, wherever we find it.”

The ICE exchange defines ISDAFIX as, “the principal global benchmark for swap rates and spreads for interest rate swaps. It 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.”

On January 29, the CFTC, in a joint announcement with the US Department of Justice, also announced sanctions against three European banks and six traders, in a spoofing sweep; the same division of Deutsche Bank was included in that sweep as well.

“The Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against Deutsche Bank AG (DB AG) and Deutsche Bank Securities Inc(DBSI) (collectively, DB), requiring DB to pay a $30 million civil monetary penalty and to undertake remedial relief.   The Order finds that from at least February 2008 and continuing through at least September 2014, DB AG, by and through certain precious metals traders (Traders), engaged in a scheme to manipulate the price of precious metals futures contracts by utilizing a variety of manual spoofing techniques with respect to precious metals futures contracts traded on the Commodity Exchange, Inc. (COMEX), and by trading in a manner to trigger customer stop-loss orders.”

Spoofing occurs when a trader puts in orders which the do not intend to fill but rather are used to create the impression trading activity to manipulate the price of a security in a certain direction.

Besides these enforcement actions, the CFTC has also made an effort this year to take on virtual currency fraudsters; they’ve announced three actions against virtual currency fraudsters since the beginning 2018.

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