The Royal Bank of Scotland to Pay $85 Million Penalty for Attempted Manipulation of U.S. Dollar ISDAFIX Benchmark Swap Rates by the CFTC

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order filing and settling charges against The Royal Bank of Scotland plc (RBS) for attempted manipulation of the ISDAFIX benchmark which requires RBS to pay an $85 million civil monetary penalty. The CFTC Order revealed that during a five-year period, commencing in January 2007 and expanding through March 2012 (relevant period), RBS, through actions of multiple traders, tried to manipulate the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX), a global benchmark reference in a variety of interest rate products. RBS participated in the unlawful conduct in order to gain advantage of certain derivatives positions it held that were priced or valued off of the USD ISDAFIX indicator.

Measures to identify and deter trading potentially aimed at manipulating swap rates will be implemented by the RBS in an effort to strengthen its internal controls and  and to maintain the integrity of interest-rate swap benchmarks.

“People around the world rely on benchmark rates such as ISDAFIX. This is our fourth enforcement action relating to attempts to manipulate the ISDAFIX. These actions, and the CFTC’s previous cases against those who sought to corrupt the LIBOR and foreign exchange benchmark rates, make clear that the Commission takes very seriously its role in ensuring the integrity of any and all benchmarks used in our markets,” Director of the CFTC’s Division of Enforcementsaid Aitan Goelman.

Specifically, the Order found that during the said time frame, RBS, through some of its traders in Stamford, Connecticut, bid, offered, and executed transactions in specific interest rate products which included both swap spreads and U.S. Treasuries, at the critical time of 11:00 a.m. fixing time with the intent to affect the reference rates and spreads captured by a leading interest rates swaps broker (Swaps Broker) in the “print” sent to submitting banks, and thereby to affect the published USD ISDAFIX.

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