In a settlement reached with the CFTC, Deutsche Bank Securities (DBSI) will pay a $70M civil penalty to resolve allegations that it attempted to rig the ISDAFIX benchmark. The regulator contends that from 1/2007 through 5/2012, the firm had a number of its traders try to rig the USD ISDAFIX, which is the benchmark used globally for interest rate products.
According to the CFTC’s order, Deutsche bank Securities would make bids, offers, and execute transactions in certain interest rate products such as US Treasuries and swap spreads at the 11am fixing time– or, if not, then close to that hour– to impact the rates seen on the electronic interest rate swap screen. They purportedly did this to lower or raise the reference rates of the swaps broker and influence the USD ISDAFIX when it was published.
Recordings of phone conversations and electronic communications show firm traders talking about taking actions in order to benefit their employer. Also, some Deutsche Bank Securities employees are accused of turning in misleading or fake submissions, again in an attempt to influence the final USD ISDAFIX rates that were published. The CFTC said that such actions were more about the traders’ attempts to manipulate USD ISDAFIX to their benefit rather than an honest assessment of the actual costs associated with going into a certain interest rate swap.
The CFTC found that the traders knew that trying to rig the USD ISDAFIX was against the law. The firm has since taken action to improve its internal procedures and controls pertaining to interest rate swaps benchmarks, including becoming better able to detect or stop attempts to rig swap rates.
The CFTC’s settlement with Deutsche Bank Securities over USD ISDAIFIX allegations was announced at the beginning of the month. This is the same week that the regulator announced that it was ordering Deutsche Bank to pay a $30M penalty for trying to rig and engage in spoofing in the precious metals futures market.
The CFTC Order (PDF)
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