Risk & Compliance

BNP Paribas Settles Benchmark Manipulation Case

BNP Paribas personnel deliberately traded to move the ISDAfix benchmark in a direction at the precise time it was being set, says the CFTC.
William SprouseAugust 30, 2018
BNP Paribas Settles Benchmark Manipulation Case

BNP Paribas agreed to pay $90 million to settle charges from the Commodity Futures Trading Commission related to attempted manipulation of the U.S. Dollar International Swaps and Derivatives Association Fix, or ISDAfix, benchmark.

ISDAfix is widely used to price swaps transactions, commercial real estate mortgages, and structured debt securities.

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In a statement, the CFTC said the bank attempted to manipulate ISDAfix to benefit derivative positions, and that multiple traders and supervisors were involved.

Between 2007 and 2012, the CFTC alleges, BNP Paribas deliberately traded to move the benchmark in a direction at the precise time it was being set. Regulators said the bank submitted false pricing reports to further influence the benchmark in a direction that would increase profits. The CFTC said the skewed submissions benefited the bank at the expense of its derivatives counterparties and clients.

BNP Paribas cooperated with the investigation and the bank has undertaken, “significant remedial action” to address issues with its internal controls. The bank neither admitted nor denied wrongdoing. It agreed to take specific steps to deter trading intended to manipulate swap rates and to ensure the integrity and reliability of its benchmark submissions.

“We won’t stop until all wrongdoers are held accountable — no matter how broadly the misconduct stretches across the industry,” said CFTC Director of Enforcement James McDonald.

The settlement was the seventh enforcement action related to the U.S. dollar ISDAfix.

Traders for the bank described their activities as ways to “play the fixing” and referred to lyrics from a Montell Jordan song from 1995, “that’s a great fixing,” “this is how we do it here :-P.”

“We accept the fine of $90 million imposed by the CFTC and are pleased to have resolved this investigation regarding past conduct,” BNP Paribas stated.

The U.K. Financial Conduct Authority and the Newark, New Jersey, field office of the Federal Bureau of Investigation assisted in the probe.

Photo: Getty Images