$250 Mln fine for USD ISDAFIX manipulated by Citi


26 May AtoZForex, Vilnius — The U.S. Commodity Futures Trading Commission (CFTC) issued another fine on Citibank, adding to the list of fines that have already been placed on the bank. The latest fine comes as a consequence of manipulation in charges relating to the USD ISDAFIX – US Dollar International Swaps and Derivatives Association Fix.

This is the second fine issued against Citibank by the CTFC, the first being in relation to Citi and their Japanese affiliates’ responsibility in Yen LIBOR manipulation as well as reporting of false nature that traders benefitted from during the financial crisis. On settling the charges, Citi faced a total of 175 million dollars in fines.

USD ISDAFIX manipulated by Citi

The current fine will expect Citi to pay 250 million dollars in civil monetary penalties. This concludes a 5-year time span (2007-2012) during which Citibank made attempts to manipulate and falsely report in concern with the USD ISDAFIX (a benchmark that is globally employed for interest rate products).

The Director of Enforcement at CFTCAitan Goelman stated that: “The terms of this settlement are intended to reflect all aspects of Citibank’s response to the investigation, including the evolving nature of its cooperation.” The ISDAFIX spreads are rates are disclosed on a daily basis and are formulated to indicate daily prevailing market rates for a fixed leg of fixed-or-floating interest rate swaps in different currencies.

Reformatory measures expected

Citi is also expected to revitalize its internal structure and control in efforts to prevent any such offenses from being repeated again in the future. The reform requirements include the installation of safeguarding measures to detect and destabilize any malpractice and manipulation that may occur in relation to swap rates, such as the USD ISDAFIX manipulated by Citi.

The CTFC uncovered that Citibank traders had made the attempt on numerous occasions to manipulate the USD ISDAFIX swap rate by changing their submissions of USD ISDAFIX. The capability of Citibank traders to manipulate the swap rates indicated a serious loophole in the system, where one of the panel member banks involved in the USD ISDAFIX setting procedure could conduct such malpractice. The manipulations helped Citi in its position of trading relative to that of its derivatives counterparties.

Furthermore, traders at Citibank helped influence the USD ISDAFIX to create benefits for its derivatives positions, as well as the group itself. They were successful in achieving this by influencing the pricing and timing of the fix.

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