Regulator extends interest rate manipulation probe

US regulator the Commodity Futures Trading Commission has launched an investigation into allegations of manipulation of another global benchmark interest rate that is used in the setting of prices for interest rate swaps.

ICAP, an interdealer broker that manages the ISDAFIX benchmark, today (9 April) published a statement on the stock exchange acknowledging media speculation that CFTC had issued a number of subpoenas to market participants and confirming that it was “cooperating” with the “wider enquiry”.

The announcement followed reports in Bloomberg News and FTAdviser sister title the Financial Times that CFTC had issued subpoenas to a number of the 16 banks that provide daily submissions used to set the rate. Subpoenas do not represent allegations of wrongdoing but are merely a call to appear at an interview to provide information.

ICAP said in its statement that it does not provide submissions to the benchmark and that it had “no knowledge of the allegations prior to the media speculation”, adding that it is launching its own investigation.

The probe marks a widening of the enquiry into global rates that came to public attention with the revelations of “lowballing” of the London interbank offered rate, or Libor, and the European offer rate, Euribor.

The ISDAFIX is derived from submissions from 16 global banks and is used in the setting of pricing for interest rate swaps, which are used by companies and investors to hedge against changes in interest rates.

Several banking groups are reviewing their past sales of the products to UK-based small- and medium-sized businesses after a Financial Services Authority review found 90 per cent of sales constituted mis-selling.