CFTC Fines ICAP $65 Million for LIBOR Manipulation

In a press release this morning the US Commodity Futures Trading Commission announced that it has:

Today issued an Order against ICAP Europe Limited (ICAP), an interdealer broker, bringing and settling charges of manipulation, attempted manipulation, false reporting, and aiding and abetting derivatives traders’ manipulation and attempted manipulation, relating to the London Interbank Offered Rate (LIBOR) for Yen. LIBOR is a critical benchmark interest rate used throughout the world as the basis for trillions of dollars of transactions. ICAP is a subsidiary of U.K.-based ICAP plc.

The CFTC’s Order finds that for more than four years, from at least October 2006 through at least January 2011, ICAP brokers on its Yen derivatives and cash desks knowingly disseminated false and misleading information concerning Yen borrowing rates to market participants in attempts to manipulate, at times successfully, the official fixing of the daily Yen LIBOR.

The Order requires ICAP, among other things, to pay a $65 million civil monetary penalty, and cease and desist from further violations as charged. Pursuant to the Order, ICAP and ICAP plc also agree to take specified steps to ensure the integrity and reliability of benchmark interest rate-related market information disseminated by ICAP and certain other ICAP plc companies.

In a separate statement about the settlement order, CFTC Chairman Gary Gensler said that:

Today’s Order against ICAP once again shows how LIBOR, a critical benchmark interest rate not anchored in sufficient transactions, has been readily rigged. Unfortunately, this is yet another reminder of why we have to coordinate internationally to transition to an alternative to LIBOR to best restore the integrity to markets.

Today’s Order also highlights the importance of Congress’ reforms through the Dodd-Frank Act to bring oversight to swaps trading platforms. Required registration of swap execution facilities becomes a reality next week, finally closing exemptions that had allowed for unregistered, multilateral swaps trading platforms.

The CFTC press release also points out that:

In a related action, the United Kingdom Financial Conduct Authority (FCA) issued a Final Notice regarding its enforcement action against ICAP Europe Limited and imposed a penalty of £14 million, the equivalent of approximately $22.4 million.