JP Morgan has been fined by authorities in the US for attempted manipulation of the ISDAFIX benchmark over a five-year period.
The Commodity Futures Trading Commission (CFTC) found that between January 2007 and January 2012 the investment bank made false reports and attempted to rig the benchmark to benefit positions it had in derivatives, including cash-settled options on interest rate swaps.
Traders at JP Morgan allegedly manipulated the US Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX) by bidding and executing in targeted interest rate products near the 11.00am fixing time to affect rates.
The CFTC claimed that one employee at JP Morgan said in an electronic communication with a swaps broker that it was possible to “muscle the fix at 11” by trading at 11.00am.
The bank’s efforts to manipulate ISDAFIX were commonly known and openly joked about by certain traders at JP Morgan, according to the CFTC.
Furthermore, on certain days JP Morgan had trading positions against the ISDAFIX it allegedly tried to manipulate the final published ISDAFIX rates by submitting rates that were false, misleading or inaccurate.
“This matter is one in a series of CFTC actions that clearly demonstrates the Commission’s unrelenting commitment to root out manipulation from our markets and to protect those who rely on the integrity of critical financial benchmarks,” said James McDonald, CFTC director of enforcement.
JP Morgan has since improved its internal controls and procedures relating to the fixing of interest rate swaps benchmarks, the CFTC concluded, including measures to detect and deter trading intended to manipulate any interest rate swaps benchmark.