The Royal Bank of Scotland plc ("RBS"), without admitting or denying findings by the CFTC, agreed to pay an $85 million penalty to settle charges of attempted manipulation of the U.S. Dollar ISDA Fix ("USD ISDAFIX"), a financial benchmark referenced in a range of interest rate products.
According to the CFTC Order, RBS traders attempted to manipulate USD ISDAFIX rates by bidding, offering and executing transactions in targeted interest rate products with the intent to affect the reference rates and spreads set for USD ISDAFIX each day at the 11:00 a.m. fixing. Such a manipulation allegedly would benefit RBS's proprietary positions.
The CFTC noted that it has now imposed over $5.2 billion in penalties through 19 actions against banks and brokers addressing ISDAFIX, FX and LIBOR Benchmark abuses.
Commentary / Bob Zwirb
The conduct alleged here occurred both before and after Dodd-Frank. The violations in the Order reflect that fact. Thus, RBS was held liable for violating the traditional manipulation clause of the CEA, Section 6(c)(3), which, inter alia, attempts to manipulate the price of any swap, futures contract, or any commodity in interstate commerce, for conduct occurring before August 15, 2011. RBS also was held liable for conduct occurring after that date for violations of the CFTC's new anti-manipulation authority under Section 6(c)(1) and CFTC Rule 180.1(a), which, inter alia, prohibit attempts to use "any manipulative device" or attempts to engage in any fraudulent acts.
The matter illustrates the enhanced legal arsenal that the CFTC enforcement division now possesses to go against conduct that it regards to be manipulative. It also shows that trading behavior that "moves" or attempts to move prices close to a fixing or an expiration will entail enhanced scrutiny by the CFTC.
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