BNP Paribas has been handed a $90 million fine to settle charges for attempted manipulation and false reporting related to the US Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX) benchmark swap rates.
A statement from the US Commodity Futures and Trading Commission (CFTC) said that BNP Paribas had attempted to manipulate the benchmark to benefit its derivatives positions in cash-settled options on interest rate swaps and certain exotic structured products.
The violations and attempted manipulation of the USD ISDAFIX benchmark took place over five years between May 2007 and August 2012, according to the CFTC.
Various BNP Paribas traders, including supervisors, were involved in the misconduct, which saw transactions in interest rate swap rates bid, offered and executed in a way that would deliberately influence the published USD ISDAFIX.
Traders were found to have bid, offered and executed trades at the critical 11.00am time in order to affect the print of the rate, according to multiple electronic communications between BNP Paribas traders.
“BNP Paribas traders recognised that ’11.00am print manipulation’ could present both risks and opportunities for the bank, including for sophisticated exotics positions that the options desk held, such as correlation and volatility swaps,” the CFTC’s statement said.
The French investment bank’s USD ISDAFIX submissions were also falsely reported at the expense of its derivatives counterparties and clients.
The CFTC added that the submissions were misleading or knowingly inaccurate as they did not say when BNP Paribas would itself bid and offer swaps, but reflect prices that were more favourable to the bank’s derivatives positions.
“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,” James McDonald, CFTC director of enforcement, commented. “And we won’t stop until all wrongdoers are held accountable – no matter how broadly the misconduct stretches across the industry.”
Several major institutions have been fined for various fraud, manipulation and misconduct around the USD ISDAFIX. In June, JP Morgan was fined $65 million by US authorities for similar violations as BNP Paribas over the same five-year period.
The CFTC concluded that BNP Paribas has begun significant remedial action to improve its internal controls and policies with regards to all benchmarks, including ISDAFIX.