CFTC to probe banks’ interest rate swaps business, says Citigroup

The investigation is the latest attempt from the US derivatives regulator to crackdown on how banks trade and deal interest rate swaps.

Citigroup said the US Commodity Futures Trading Commission (CFTC) has launched an industry-wide investigation into some of the biggest interest rate swaps dealers.  

In a regulatory filing, it stated the derivatives watchdog is probing the “trading and clearing of interest rate swaps by investment banks”, and that “Citigroup is cooperating with the investigation”.

According to an article from Bloomberg News, the investigation is linked to a 2015 antitrust lawsuit, in which a Chicago-based pension fund alleged that 12 of the biggest swap dealers had blocked fund managers attempts from trading listed derivatives on exchanges in order to preserve their profits.

Defendants in the 2015 complaint include Citigroup, Goldman Sachs, JP Morgan, Credit Suisse and Deutsche Bank, as well as Tradeweb Markets and ICAP Capital Markets.

A separate Bloomberg News also revealed its interest rate swaps trading desk has made over $300 million of revenue this year.

A spokesperson for Citigroup had not yet responded at the time of publication.

According to its most recent quarterly filings, Citi’s interest rate derivatives contracts are measured at a fair value of over $500 billion, with its total derivatives trading measured at a fair value of over $670 billion as of 30 September.

It is the latest investigation into the derivatives trading business of banks, following a series of high-profile fines over alleged market manipulation.

Earlier this year, Citigroup agreed to pay $425 million to settle claims from the CFTC that it manipulated the ISDAfix benchmark between 2007 and 2012. It was also ordered to pay $175 million to settle claims of US Dollar Libor rigging.