Goldman Sachs has been ordered to pay a fine of $120m by the US derivatives regulator over claims that its traders tried to rig a vital benchmark in the $300tn market for interest-rate swaps.
Yesterday’s order from the Commodity Futures Trading Commission is the third relating to attempted manipulation of Isdafix, a key benchmark, following penalties for Citigroup ($250m) and Barclays ($115m) in May.
It drags Goldman into a global rate-rigging probe that began with Libor and Euribor, two interbank lending rates, and moved on to foreign exchange. The CFTC has wrung fines of more than $5.2bn in 18 actions against a host of Wall Street banks.
The CFTC said Goldman’s unlawful conduct involved multiple traders, including the head of its interest-rate products trading group in the US.
“Penalties for manipulation should fall on the responsible Goldman perpetrators, not shareholders,” said Bart Naylor, financial policy advocate at Public Citizen, a lobby group.
According to the CFTC’s order, traders at Goldman carried out transactions in such a way as to try to influence the published US dollar Isdafix rate to benefit its own derivatives positions. In addition, the bank made “false reports” on Isdafix, skewing its rate submissions to benefit the bank at the expense of its derivative counterparties and clients. Goldman traders called attempts to rig the rate “gaming the fix”, the CFTC said.
In one 2007 episode described by the CFTC as “particularly brazen”, a Goldman trader told his broker to refrain from reporting any changes in prices that went against the bank’s interests until after 11am that day, which was when Goldman was supposed to submit a quote to the administrator of the benchmark. Submissions were supposed to reflect where the banks would trade interest rate swaps to a creditworthy dealer at that time.
The trader then directed the broker to do whatever it took to keep the price down at that point. “Just have your screen guy go to coffee . . . That’s why I’m calling you 10 minutes before, so you can get all this worked out,” said the trader. “Have your screen guy go to the bathroom.”
The misconduct went on for at least five years through March 2012, the CFTC said. Goldman said: “We are pleased to have resolved these matters and have already taken steps to enhance our policies and procedures.”
