CFTC penalizes Goldman Sachs $120 million in rate-rigging probe

Goldman Sachs has agreed to pay a $120 million penalty after government regulators found its traders worked to rig a key benchmark rate to profit the firm.

The Commodity Futures Trading Commission announced Wednesday that it had struck a settlement with the Wall Street giant, after charging that from 2007 to 2012 the firm’s traders deliberately tried to skew a key benchmark to maximize profits for Goldman’s own derivatives positions.

The regulator found that Goldman traders referred to the “jacked rate” and “gamed the fix” in working to skew the benchmark to benefit the firm. Wednesday’s settlement marks the latest in a long-running series of enforcement actions taken by regulators against major financial institutions that worked to deliberately misrepresent key benchmark rates for financial markets to protect in-house profits.

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Specifically, the CFTC found that Goldman traders for years conspired to rig the U.S. Dollar International Swaps and Derivatives Association Fix, otherwise known as ISDAFIX. That rate serves as a global benchmark for a wide range of derivatives and interest rate swaps, and is meant to represent the prevailing daily market rate that should serve as a basis for other trades.

But the CFTC found that Goldman deliberately handled its trading in such a way that it could exert influence on how that rate was set. The rate is set daily at 11AM, and is determined via submissions of market activity from a range of major financial institutions. The regulator found that Goldman would change its trading around that time deliberately to obtain a desired benchmark, and also skewed its own books to further move the rate in an advantageous direction.

The CFTC also chided Goldman for failing to fully cooperate with its probe, claiming the firm was slow in producing documents and initially withheld relevant information.

No specific individuals were punished as part of Wednesday’s action, and Goldman promised to improve its operations to prevent such activity in the future.

Wednesday’s settlement also marked the latest in a lengthy series of probes and penalties aimed at major financial institutions deliberately skewing benchmarks that are meant to provide a foundation for financial activity across the world.

The CFTC said that this latest settlement means that it has assessed $5.2 billion in penalties to 18 different firms over the last three years.