NEX Group to pay $50 million for USD ISDAFIX rigging

NEX Group subsidiary Intercapital Capital Markets was found to have helped bank clients manipulate the USD ISDAFIX benchmark.

NEX Group has been fined $50 million after the US derivatives regulator found that one of its subsidiaries, Intercapital Capital Markets, helped its bank clients rig the ISDAFIX benchmark.

Formerly ICAP Capital Markets, Intercapital’s swaps brokers were allegedly recruited by traders at its bank clients to help manipulate the US Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX).

The US Commodity Futures Trading Commission (CFTC) said the misconduct took place over a five-year period, from at least January 2007 through to December 2012. The manipulation was made to benefit Intercapital’s bank clients’ derivatives positions, including positions involving cash-settled options on interest rate swaps.

“When intermediaries in our markets help others commit wrongdoing, they will be held accountable,” said James McDonald, CFTC director of enforcement. “This matter is one in a series of CFTC actions that continues to demonstrate the Commission’s unrelenting commitment to protect those who rely on the integrity of critical financial benchmarks. 

“There is no room for manipulation of our markets, and we will continue to pursue both those who seek to manipulate and anyone who chooses to assist them.” 

Intercapital is the latest institution to be fined by the CFTC for USD ISDAFIX rigging. Last month, BNP Paribas was fined $90 million to settle charges for attempted manipulation of the benchmark. JP Morgan was also handed a $65 million penalty by the US derivatives watchdog in June for the same offence.

Similar to the claims against BNP Paribas and JP Morgan, the CFTC said that Intercapital carried out ’11.00am print manipulation, meaning traders bid, offered and executed interest rate transactions at the critical 11.00am time in order to affect the print of the rate.

The regulator added that sometimes Intercapital’s brokers and their bank trader clients would explicitly discuss traders’ intent to manipulate USD ISDAFIX.

“If you want to affect it at eleven, you tell me which way you want to affect it, we’ll, we’ll attempt to affect it that way,” said one broker to a trader from a bank in 2007, according to the CFTC.

Intercapital’s role in the publication of the reference rates and collection of data for the ISDAFIX benchmark setting process ended in 2014, and the voice broking business, including its swaps desks, was sold to Tullett Prebon in December 2016. Prior to the sale, the CFTC said that the business took steps to rectify the manipulation and ensure the integrity of the USD interest rate swaps trading related to the benchmark.

“The underlying CFTC investigation had been ongoing for a number of years and NEX is pleased to have brought this matter to a conclusion,” NEX Group concluded in a statement.