Citi Draws $250m Fine for Charges Surrounding USD ISDAFIX

The fines at Citi keep coming, this time a $250 million penalty for manipulating the USD ISDAFIX.

The U.S. Commodity Futures Trading Commission (CFTC) has issued another order against Citibank today, extending its list of fines to the lender after manipulation charges concerning the US Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX), citing a recent CFTC manifest.

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The CFTC fine against Citibank is the second one issued today, and found that Citi and its Japanese affiliates were responsible for yen LIBOR manipulation and false reporting that helped benefit traders during the financial crisis. As such, Citi faced a $175 million fine after settling charges.

Its latest fine however will see the group paying $250 million in a civil monetary penalty. This finality stems from a five-year period (January 2007-January 2012) in which Citibank attempted to manipulate and made false reports concerning the USD ISDAFIX, a globally used benchmark for interest rate products.

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More specifically, the ISDAFIX rates and spreads are published on a daily basis and are designed to indicate a prevailing daily market rate for the fixed leg of a standard fixed-for-floating interest rate swap in various currencies.

In conjunction with the fine, Citi is also expected to undertake a series of steps to remedy its internal infrastructure and controls to allay any such chances of a repeat offense. This includes installing measures to help detect and deter trading potentially that are intended to manipulate swap rates such as USD ISDAFIX.

The CFTC found that Citibank’s traders had undergone multiple attempts to manipulate the USD ISDAFIX by altering the lender’s USD ISDAFIX submissions. In essence, this underscored a vulnerability given the bank’s role as a panel bank in the USD ISDAFIX setting process, and helped effectively benefit Citi’s trading positions at the expense of its derivatives counter parties.

Moreover, Citibank traders also helped influence the published USD ISDAFIX to benefit the group itself as well as its derivatives positions, citing the CFTC order. This was accomplished by actions that succeeded in influencing the timing and pricing of the fix.

“The terms of this settlement are intended to reflect all aspects of Citibank’s response to the investigation, including the evolving nature of its cooperation,” noted Aitan Goelman, the CFTC’s Director of Enforcement, in the order.

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