The Commodity Futures Trading Commission (CFTC) has settled charges against BNP Paribas Securities Corp. for attempting to manipulate the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX) benchmark. The firm will pay a $90 million civil monetary penalty.
The CFTC order details a five-year scheme, from May 2007 through August 2012, where BNP Paribas allegedly attempted to influence the USD ISDAFIX to benefit its derivatives positions. The manipulation involved multiple traders, including supervisors, according to the CFTC. The USD ISDAFIX is a key global benchmark used in a wide range of interest rate products.
“This matter, the seventh enforcement action relating to the USD ISDAFIX benchmark, further demonstrates that the CFTC will continue to be vigilant and aggressive in protecting the integrity of our markets,” stated James McDonald, CFTC Director of Enforcement. “And we won’t stop until all wrongdoers are held accountable—no matter how broadly the misconduct stretches across the industry.”
The ISDAFIX rate is established daily at 11:00 a.m. Eastern Time, based on swap rates and spreads from a U.S.-based brokering firm. The benchmark is intended to reflect the prevailing mid-market rate for interest rate swaps and is used for cash settlement of options and valuation of various financial products.
The CFTC found that BNP Paribas traders deliberately executed transactions in interest rate swap spreads, timed and priced to influence the published USD ISDAFIX. The bank also allegedly skewed its submissions for the ISDAFIX to benefit its own derivatives positions at the expense of counterparties and clients.
In addition to the financial penalty, the order requires BNP Paribas to cease and desist from further violations and implement remedial measures. These include enhanced detection and deterrence of manipulative trading practices, ensuring the integrity of benchmark submissions, and improving internal controls.
Source: CFTC.gov
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