The Royal Bank of Scotland agreed to pay $85 million in penalties to settle CFTC charges that the firm had attempted to manipulate a key foreign exchange swaps benchmark rate - the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX). In addition to the monetary fine, RBS agreed to revise its internal control procedures. 

According to the CFTC Order ...  over a 5-year period from 2007 through early 2012, multiple RBS traders based in Stanford, CT, attempted to fix the USD ISDAFIX through its trading at the 11:00 a.m. fixing in order to benefit cash-settled swaptions held by RBS that were priced or valued against the USD ISDAFIX benchmark.

During the relevant period, USD ISDAFIX was set each day in a process that began at 11:00 a.m. Eastern Time with the recording of swap rates and spreads from a U.S.-based unit of a leading interest rate swaps broking firm, which disseminated the rates and spreads captured in this 11:00 a.m. “snapshot,” “fix,” or “print” — as it was referred to by traders and brokers — to a panel of banks including RBS. The banks then made submissions to indicate where they would each bid or offer interest rate swaps to a dealer of good credit.

As captured in emails and audio recordings, RBS traders often discussed their intent to move USD ISDAFIX to benefit their positions. RBS traders would often tell their brokers at Swaps Broker the intent of their trading at 11:00 a.m. -  e.g., telling their swap broker, “I’m going to have to get 10s higher and 7s lower.”

RBS traders bid, offered, and executed transactions of swap spreads and U.S. Treasuries contracts at the critical 11:00 a.m. fixing time in order to affect the “print,” i.e., the reference rates captured at 11:00 a.m. and sent to submitting banks, and thereby to affect the published USD ISDAFIX. RBS traders understood that by using swap spreads and/or treasury trading it was possible to move the USD ISDAFIX rate.