The US Commodity Futures Trading Commission (CFTC) has fined BNP Paribas $90 million and Deutsche Bank $70 million for attempted manipulation of the ISDAFIX benchmark, with the latter also charged $30 million for manipulation, attempted manipulation, and spoofing in the precious metals futures markets. UBS has also been fined $15 million for attempted manipulation and spoofing in the same markets.
One of the CFTC Orders finds that over a five-year period, beginning in at least January 2007 and continuing through May 2012, Deutsche Bank Securities (DBSI) made false reports and through the acts of multiple traders, attempted to manipulate the US Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX), a 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.
In addition, the CFTC found that, beginning in or about May 2007 and continuing through at least August 2012, BNP Paribas also attempted manipulate the USD ISDAFIX, noting that the banks’ unlawful conduct involved multiple traders and included supervisors.
James McDonald, CFTC director of enforcement, comments: “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.”
Separately, the CFTC also found that from at least February 2008 until September 2014, certain staff at Deutsche engaged in a scheme to manipulate the price of precious metals futures contracts by utilising a variety of manual spoofing techniques with respect to precious metals futures contracts traded on the Commodity Exchange (COMEX), and by trading in a manner to trigger customer stop-loss orders.
“Today’s enforcement action demonstrates that the Commission will aggressively pursue entities that manipulate and spoof in our markets. Further, as a reflection of the Division’s enhanced self-reporting and cooperation program, today’s action shows that the Commission will recognise and give meaningful credit to companies that substantially cooperate in our investigations and proactively undertake remedial efforts. The ultimate goal of the Division’s cooperation program is to enable the Division to identify and hold accountable the individuals responsible for the wrongdoing – and not just the companies that employed them. Today’s actions represent a significant step in that direction,” says McDonald.
The CFTC also found that spot traders at UBS attempted to manipulate the price of precious metals futures contracts on COMEX via spoofing techniques and by trading in a manner to trigger customer stop-loss orders between January 2008 and at least December 2013.
In a statement issued today, McDonald notes that UBS received a “substantially reduced penalty” because of the bank’s cooperation with the CFTC, adding that this “should send a strong signal to the market that the Commission takes seriously the benefits of self-reporting and cooperation”.
The CFTC has also charged James Vorley, a UK resident, and Cedric Chanu, a United Arab Emirates resident, in relation to the spoofing allegations. Both were employed as traders at Deutsche Bank – Vorley based in London and Chanu based in London and Singapore. The pair have previously been indicted in July by the US Department of Justice (DoJ) for the same offense.