CFTC orders RP Martin to pay $1.2 million penalty

Press Release for May 15

CFTC Press Release: 6930-14


CFTC Charges RP Martin Holdings Limited and Its Subsidiary, Martin Brokers (UK) Limited, with Manipulation and Attempted Manipulation of Yen Libor

RP Martin Accepted over $400,000 for Unlawful Manipulative Assistance to Traders


CFTC Orders RP Martin to Pay a $1.2 Million Civil Monetary Penalty


Washington, DC - The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order against RP Martin Holdings Limited, and its subsidiary, Martin Brokers (UK) Limited(collectively, RP Martin), an interdealer broker, filing and settling charges of manipulation, attempted manipulation, false reporting, and aiding and abetting derivatives traders’ acts of manipulation and attempted manipulation of the London Interbank Offered Rate (LIBOR) for Yen, a leading interest rate benchmark used to price trillions of dollars of transactions. 

The CFTC Order finds that, from at least September 2008 through at least August 2009, RP Martin brokers on its Yen desk at times 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.  RP Martin brokers did so primarily to aid and abet a senior Yen derivatives trader (Senior Yen Trader) employed at UBS Securities Japan Co., Ltd. (UBS) and later at another bank, who was attempting to manipulate Yen LIBOR to benefit his derivatives trading positions tied to this benchmark.  In exchange for their unlawful assistance, RP Martin brokers accepted payments totaling more than $400,000, through the form of wash trades that were designed solely to generate commissions for RP Martin, according to the Order.  (Excerpts of broker communications follow this release.)

The CFTC Order requires RP Martin, among other things, to pay a $1.2 million civil monetary penalty.  RP Martin also agrees to take specified steps to ensure the integrity and reliability of benchmark interest rate-related market information disseminated by RP Martin. 

“Today’s action is part of our on-going efforts to ensure that the LIBOR rate is free of fraud and manipulation.  Further, this action reflects the Commission’s unwavering commitment to hold those who seek to undermine the integrity of the U.S. financial markets responsible for their actions,” said Gretchen Lowe, Acting Director of the CFTC’s Division of Enforcement.  “I thank the hardworking staff of the CFTC and our colleagues in the U.K. for their continued dedication and vigilance to protect market integrity.”

Yen LIBOR is fixed daily based on rates contributed by panel banks that are supposed to reflect each bank’s assessment of costs of borrowing unsecured funds in the London interbank market.  RP Martin, as an interdealer broker, intermediates cash and LIBOR-based derivatives transactions between banks and other institutions.  As a service to clients and to solicit and maintain business, RP Martin, like other interdealer brokers, also provides banks with market insight, including assessments of where LIBOR is likely to fix.  In providing this market information, interdealer brokers are implicitly representing that such market information reflects their third-party unbiased assessment of borrowing costs and market pricing based on objective, observable data, some of which they uniquely possessed. 

The CFTC Order finds that RP Martin used multiple means to assist the UBS Senior Yen Trader in his efforts to manipulate Yen LIBOR.  First, RP Martin brokers provided misleading recommendations to Yen LIBOR submitters regarding where they should set certain Yen LIBOR tenors, rather than providing their unbiased evaluations of Yen borrowing costs.  Second, RP Martin brokers contacted certain Yen LIBOR submitters and asked them directly to move their Yen LIBOR submissions in a manner that would benefit the Senior Yen Trader.  Lastly, RP Martin brokers occasionally offered nonexistent cash bids, also known as “spoof” bids, to their clients, including Yen LIBOR submitters, in the hopes that such bids might influence Yen LIBOR submissions to the benefit of the Senior Yen Trader.

The Order further finds that this unlawful conduct occurred in part because RP Martin’s supervision, internal controls, policies and procedures were inadequate.  For example, RP Martin never audited the Yen desk, and failed to question the wash trading activity, even after an RP Martin manager who monitored back-office brokerage activity raised the issue with RP Martin management.


RP Martin Must Strengthen Internal Controls to Ensure Integrity and Reliability of Benchmark Interest Rate-Related Market Information

The CFTC Order further requires RP Martin to implement and strengthen its internal controls, policies and procedures governing benchmark interest rate-related market information that RP Martin sends to market participants.  Among other things, the Order requires RP Martin to:


  • ·         Base written benchmark interest rate-related predictions on certain factors;
  • ·         Document and retain basis for market publications;
  • ·         Require certain disclosures, including that certain market information reflects the opinions of the author, sources of information or data upon which opinion is based, and use of any models, correlated markets or related trading instruments;
  • ·         Review certain electronic and audio communications;
  • ·         Implement auditing, monitoring and training measures;
  • ·         Report to the CFTC on its compliance with the terms of the Order; and
  • ·         Continue to cooperate with the CFTC.

The CFTC Order also recognizes the cooperation of RP Martin in the final stages of the Division of Enforcement’s investigation and the resolution of this matter.

In a related action, the United Kingdom Financial Conduct Authority (FCA) issued a Final Notice regarding its enforcement action against Martin Brokers (UK) Limited and imposed a penalty of £630,000, the equivalent of approximately $1 million. 

The CFTC acknowledges the valuable assistance of the FCA, the U.S. Department of Justice, and the Washington Field Office of the Federal Bureau of Investigation.




With this Order, the CFTC has now brought a total of 6 actions and imposed penalties of $1.766 billion on entities for manipulative conduct with respect to LIBOR submissions and other benchmark interest rates.  In these actions, the CFTC also orders each institution to undertake specific steps to ensure the integrity and reliability of benchmark interest rate submissions.  See In re Cooperatieve Centrale RaiffeisenBoerenleenbank B.A., Order Instituting Proceedings Pursuant To Sections 6(c) And 6(d) Of The Commodity Exchange Act, Making Findings And Imposing Remedial Sanctions (October 29, 2013) ($475 million penalty) (CFTC Press Release 6752-13), In re ICAP Europe Limited, CFTC Docket No. 13-38 (September 25, 2013) ($65 Million penalty) (CFTC Press Release6708-13); In re The Royal Bank of Scotland plc and RBS Securities Japan Limited, CFTC Docket No. 13-14 (February 6, 2013) ($325 Million penalty) (CFTC Press Release 6510-13); In re UBS AG and UBS Securities Japan Co., Ltd., CFTC Docket No. 13-09 (December 19, 2012) ($700 Million penalty) (CFTC Press Release 6472-12); and In re Barclays PLC, Barclays Bank PLC, and Barclays Capital Inc., CFTC Docket No. 12-25 (June 27, 2012) ($200 million penalty) (CFTC Press Release 6289-12).


CFTC Division of Enforcement staff members responsible for this case are Aimée Latimer-Zayets, Anne M. Termine, Maura M. Viehmeyer, James A. Garcia, Boaz Green, Kassra Goudarzi, Rishi K. Gupta, Jonathan K. Huth, Timothy M. Kirby, Terry Mayo, Elizabeth Padgett, Philip P. Tumminio, and Jason T. Wright.


Next page: Examples of Misconduct From Written Communications

Page 1 of 3 >>
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome