Washington, D.C. – Barclays PLC, Barclays Bank PLC, and Barclays Capital Inc. have agreed to settle charges brought by the U.S. Commodity Futures Trading Commission (CFTC) for attempting to manipulate the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX), a key global benchmark for interest rate products. The settlement, announced May 20, 2015, marks the CFTC’s first enforcement action addressing abuses of this specific benchmark.
The CFTC found that between January 2007 and June 2012, Barclays engaged in practices designed to manipulate the USD ISDAFIX rate, and made false reports concerning it. According to the Order, Barclays traders bid, offered, and executed interest rate swap spread transactions with the deliberate intention of influencing the published USD ISDAFIX to benefit the bank’s derivatives positions. Furthermore, employees making the bank’s submissions to the USD ISDAFIX allegedly skewed those submissions to benefit Barclays at the expense of its counterparties and customers.
As a result of the settlement, Barclays will pay a $115 million civil monetary penalty. The bank is also required to cease and desist from further violations, and to implement remedial steps to detect and deter trading intended to manipulate swap rates. These measures aim to ensure the integrity and reliability of Barclays’ benchmark submissions and improve internal controls.
“The methods and techniques of manipulation are limited only by the ingenuity of man,” stated Aitan Goelman, the CFTC’s Director of Enforcement. “Here, the varied and sophisticated means employed by Barclays traders in their attempts to manipulate USD ISDAFIX are exposed.”
The USD ISDAFIX rate is a benchmark used for valuing cash settlement of options on interest rate swaps and as a valuation tool for a wide range of financial products. During the period in question, it was used in the settlement of exchange-traded interest rate swap futures contracts and in the calculation of proprietary indices and structured products. Pension funds, local governments, and state governments relied on instruments based on USD ISDAFIX to hedge against interest rate changes.
The USD ISDAFIX was previously set daily, beginning at 11:00 a.m. Eastern Time, with rates and spreads recorded from a U.S.-based brokerage firm.
Source: CFTC.gov
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