BNP Traders Used Salt-N-Pepa Lyric in Bid to Rig Benchmark Rate

(Bloomberg) -- BNP Paribas SA traders referenced song lyrics when trying to rig a benchmark for interest-rate derivatives, with a favorite tune being a 1987 rap hit by Salt-N-Pepa, according to U.S. regulators.

“Push it real good,” one unnamed options trader at the French bank said in an internal communication that was released Wednesday by the Commodity Futures Trading Commission.

For the traders’ efforts, BNP Paribas was slapped with a $90 million fine. It became the latest bank sanctioned by the CFTC over allegations that its traders for years attempted to manipulate the ISDAfix, which helps determine the value of trillions of dollars of derivatives. In settling the case, BNP Paribas didn’t admit or deny the allegations.

“This matter, the seventh enforcement action relating to the USD ISDAfix benchmark, further demonstrates that the CFTC will be vigilant and aggressive in protecting the integrity of our markets,” James McDonald, the agency’s enforcement director, said in a statement.

Montell Jordan

From about May 2007 through at least August 2012, employees at a New York unit of BNP Paribas made bids that were deliberately designed to influence the ISDAfix to benefit their derivative positions, the CFTC said. Other banks that have been fined over similar allegations include JPMorgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc.

Montell Jordan’s 1995 hit “This is How We Do It,” also came up in discussions between BNP Paribas traders, according to the CFTC. When an options trader complemented a swaps trader on a “great fixing” for the derivatives benchmark, the swaps trader responded, “this is how we do it here,” the agency said.

The CFTC said the coordination was openly discussed internally, with an options trader sending a widely disseminated end-of-day email that even supervisors and heads of desks received. The messages detailed how effective the bank had been in trying to move markets in a desired direction, the agency said.

“We did well on 11am fixing, cooperating with the swaps desk to push the screen substantially towards yesterday fixing,” one such email said.

Strengthening Compliance

In a statement, BNP Paribas said it is pleased to have resolved the investigation, adding that it relates to past conduct.

“Since the time period described in the settlement, BNP Paribas has proactively strengthened its compliance and controls, as well as made significant changes to its business model as part of the bank’s remediation efforts,” the company said. “The CFTC has acknowledged BNP Paribas’s efforts as well as our significant cooperation with its investigation.”

©2018 Bloomberg L.P.