Report CFTC Finds Criminal Behavior in ISDAFIX Investigation

As we reported last week, the first lawsuit was filed in the ISDAFIX controversy.  This week Bloomberg states that the CFTC, which is limited to bringing civil cases, reported evidence of criminal behavior to the DOJ. The DOJ can then determine whether to pursue a criminal investigation.  Bloomberg bases the article on a person familiar with this matter.

The report alleges that ICAP, a broker with a central role in setting ISDAFIX through January 2014, accepted large numbers of trades from banks at the close, attempting to influence the fix.  This "banging the close" is similarly charged in FX benchmark cases.  In addition to these actual trades, banks also submitted rate quotes as part of the process of setting ISDAFIX.  The lawsuit last week alleged that identical quotes were submitted by multiple banks on most days, down to the thousandth of a basis point.

The ISDAFIX cases may have a better chance of reaching antitrust status, unlike the LIBOR case, due to the actual trades involved and the lack of reasons other than profit for banks entering into these ISDAFIX trades.