Washington, D.C. – ICAP Capital Markets LLC, now operating as Intercapital Capital Markets LLC, has been slapped with a $50 million penalty by the Commodity Futures Trading Commission (CFTC) for its role in a widespread scheme to manipulate the ISDAFIX benchmark. The CFTC alleges that, for over five years, ICAP brokers actively aided several bank clients in their attempts to influence the benchmark, which is crucial for pricing a wide range of interest rate products.
The investigation, spanning from January 2007 to December 2012, revealed that ICAP’s swaps brokers were routinely enlisted by traders at major banks to manipulate the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX). This manipulation was intended to benefit the banks’ derivatives positions, particularly cash-settled options on interest rate swaps.
According to the CFTC’s order, ICAP played a key role in establishing the USD ISDAFIX rate each day by recording trading activity on its platforms around 11:00 a.m. Eastern Time. Traders at various banks then attempted to manipulate this “print” by executing transactions designed to influence the final published rate. The 11:00 a.m. USD ISDAFIX rate was a critical component in settling options and valuing other interest rate products.
Evidence presented by the CFTC includes internal communications demonstrating explicit discussions between ICAP brokers and bank traders about their intent to manipulate the benchmark. In one instance, a broker in 2007 offered to influence the rate in a specific direction upon request from a bank trader. Another trader, in 2008, explicitly requested a “low ISDAFIX” while also stating a preference to avoid leaving a visible trace of the manipulation.
“When intermediaries in our markets help others commit wrongdoing, they will be held accountable,” stated James McDonald, CFTC Director of Enforcement. “This matter is one in a series of CFTC actions that continues to demonstrate the Commission’s unrelenting commitment to protect those who rely on the integrity of critical financial benchmarks.”
The $50 million civil monetary penalty underscores the CFTC’s commitment to prosecuting manipulation of financial benchmarks and holding those who facilitate such schemes responsible for their actions.
Source: CFTC.gov
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