US CFTC imposes a $45M fine against HSBC Bank USA
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The Commodity Futures and Exchange Commission (CFTC) has imposed a $45 million fine against HSBC Bank USA. The institution is facing this fine for allowing “manipulative and deceptive trading” by the traders and a failure to maintain records on business calls.
CFTC imposes a $45M fine against HSBC
The CFTC said that it has reached a settlement with a subsidiary division of the British global bank known as HSBC. The CFTC said that between March 2012 and 2015, traders at HSBC Bank USA engaged in deceptive trading and spoofing linked to swaps with bond issuers.
The CFTC’s statement has also said that traders at the firm used material confidential information from the counterparties regarding the timing and pricing of issuer swaps to raise the profitability of HSBC at their expense.
The regulator has also said that the firm attempted to manipulate the on-screen prices where issuer swaps are based. It manipulated these prices by spoofing the interdealer brokerage platforms that controlled the screens. Spoofing is an illegal trading practice that allows traders to create orders before canceling them before they are executed.
The CFTC statement further said that “HSBC traders intentionally traded at the broker firms controlling the relevant screens during telephonic pricing calls in which the bond issuances, and the related issuer swaps, were priced, and HSBC traders structured their trading intentionally to move prices for the relevant swaps on these screens.”
The regulator has also said that senior management and the supervisors at the subsidiary were aware of the practice and even encouraged traders to participate. The CFTC said that between March and July 2020, HBSC did not create or maintain records of the mobile phone calls of its swap business, which points to a recording failure.
The derivatives regulator has also said that it also took action against two HSBC provisional swap dealers, including HSBC Bank USA and HSBC Bank Plc. The two entities also filed an over $30 million penalty for the record-keeping failures and discussing deals using unapproved platforms such as WhatsApp and personal text.
The regulator also said that it found that the widespread use of unapproved communication methods was against the policies and procedures at HSBC. These policies and procedures banned business-related communication from being handled through unapproved platforms.
CFTC continues with a regulatory crackdown
The CFTC had earlier said that it imposed a fine against The Bank of Nova Scotia. The bank is a registered swap dealer. It also extended the fine of $15 million to Scotia Capital UA Inc, which is a futures commission merchant. The firms were fined for failing to maintain their records for several years. The CFTC also said that it detected that the companies used unapproved communication methods.
The last action by the CFTC also said that the affiliates of HSBC and BNS were a continuation of the regulator’s crackdown on electronic trading platforms in the US. In September last year, the CFTC imposed a total penalty of $1.1 billion on 16 firms on Wall Street. The firms were fined for using unapproved communication channels.
