Goldman Sachs Group (NYSE:GS) has reached a $120 million settlement with the US’ Commodity Futures Trading Commission (CFTC) following charges of manipulation and falsified reports surrounding the US Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX), per a regulatory filing.
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The USD ISDAFIX acts as a global benchmark for interest rate products. Moreover, the ISDAFIX rates and spreads constitute some of the most widely followed benchmarks for interest rate swaps and related derivatives, which dictate the prevailing and daily market rate for multiple currencies.
The CFTC order charged both Goldman Sachs Group, Inc. and Goldman, Sachs & Co., in addition to the head of the group’s Interest Rate Products Trading Group – in particular, between January 2007 and March 2012, the group was responsible for overseeing multiple instances of traders manipulating and falsifying reports in regards to the ISDAFIX in New York.
The main issue to have arisen was due to Goldman Sachs, via its traders, bid, offered, and executed transactions across interest rate swap spreads, treasuries, and Eurodollar futures contracts in a manipulative manner. The subsequent influence of the timing and prices of these transactions helped influence the USD ISDAFIX in order to benefit the group in its derivatives positions.
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CFTC Calls for Steps to Prevent Abuse
Consequently, the CFTC order has levied a $120 million civil monetary penalty on Goldman, a cease and desist from further violations as charged, and a call to institute other steps to ensure that such violations will not transpire again.
These include detecting and deterring trading intended to manipulate swap rates such as USD ISDAFIX, as well as supporting a more reliable benchmark submission policy, along with improved internal controls.
The regulator is also not taking any chances, mandating Goldman’s current supervisor responsible for ISDAFIX to provide the requisite certification attesting to the prowess and effectiveness of the bank’s internal controls and aforementioned measures.
According to Aitan Goelman, the CFTC’s Director of Enforcement, in a recent statement on the order: “This matter, the third enforcement action relating to the ISDAFIX benchmark, demonstrates the breadth of this kind of misconduct across the industry, and within Goldman, the extent of the misconduct across trading desks and product lines.”
“The Division will continue to be vigilant and aggressive in protecting the integrity of the ISDAFIX and other important benchmarks relied upon by the markets,” he added.