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On December 20, 2019 the Commodity Futures Trading Commission (CFTC) charged French national Christophe Rivoire with manipulation of U.S. dollar interest rate basis swaps during June and July of 2012. Mr. Rivoire was the former head of HSBC Holdings Plc’s North American interest rates business working in the Bank’s office in Manhattan. The complaint filed in the Southern District Court of New York seeks “Injunctive and Other Equitable Relief and for Civil Monetary Penalties Under the Commodity Exchange Act and Commission Regulations”.

The 39-page CFTC complaint states the HSBC priced a swap for an Asian public financial institutional client priced off the 5-year basis swap to be priced in the June/July 2012 timeframe. Rivoire was to have known the bank would make more money on the swap if the 5-year basis swap leg of the pricing formula was priced lower during the pricing call. Rivoire directed a trader under his supervision to “push the screen as much as we can before the pricing” in order to increase the profitability of the transaction with the Asian client. The Asian client was attempting to manage its interest rate exposure related to a bond issuance with the basis swap.

As part of the transaction, the client requested the pricing of the swap be based off broker screen quotes. Part of the pricing of the transaction included subtracting the broker quote on five-year basis swap from one broker screen from a five-year basis swap on another broker screen to determine the Forward Rate Adjustment. Forcing down the price on the screen of one of the components would have made the transaction more profitable for the bank.

Communications are a key element of the CFTC allegations

The complaint references several communications that took place articulating and furthering the scheme. In one such reference the Complaint states that Rivoire explains to the Co-Head of Rates in a bank affiliate how the trader could “push the rates” during the important pricing call time frame.  Rivoire reportedly stated to the Co-Head that the trader could, “push the [U.S. treasury] market, I mean obviously, a tick or whatever” garnering the Bank an additional $400,000 to $500,000. Rivoire was also alleged to have explained that if they pushed the basis swap during the Asian trading session the bank could make even more money.

The Complaint also alleges that Rivoire, in internal communications, stated that the Bank needed to “drive” and “control” the execution of the Issuer Swap, the Bank needed to “drive the execution process”, his goal was to “minimize” the loss on the Issuer Swap and “we need to control the execution of the transaction and not [the Issuer]. If it is not the case, the return may be dramatically lower.”

An employee of the Bank’s affiliate is claimed to have said the, “Issuer is just innocent, and just look[s] at [the Broker Screens], that’s it.” and “So long as [the U.S. treasury rate] shows on [Broker Screen], they agree, they never challenge you, because they are not trading in treasury. I think you misunderstood. They are not professional; they are just [Country A] government people.”

Trader A then told the Broker “I’m going to need to move that” and “I’m going to give you prices and I just need you to move it.” Apparently, the broker acknowledged the trader’s intent. During the day of pricing the 5-year basis swap price was moving up. After the trader complained to the broker the Broker stated that “I’m watching it” and “we just knocked it back down.”

There were also references to communications between traders at the bank as to the size needed to move the prices lower (against the profitability of the trading desk but in favor of the profits to be made on the bond/swap transaction) and if the issuer was “going to go crazy if they see the screen move 10 min b4 pricing[?]” .

The Complaint goes through a very lengthy and detailed (minute by minute) listing of the communications and activities during the pricing call. The day after the pricing call traders at the bank are discussing the previous day’s activity. “Later, Trader A commented to Trader B that the price for Five-Year Basis Swaps “should be higher than yest[erday,] i really pushed it down.”” Trader A, in a communication with a trader at a different institution wrote, “that he had moved the damn thing … 0.75.”

A change in behavior

The Complaint also highlights how the trader executing Rivoire’s instructions changed his trading behavior. Because the pricing of the swap related to the bond issuance was to be determined in part on a specific broker screen the trader transacted in the broker market as opposed to the interdealer broker market. “Trader A later told Trader B that trading through the Broker Firm was “not my 1st choice” and that it “would have been much easier” to trade through his preferred broker firm.”

Allegations were also made against the broker, although the broker is unnamed in this complaint and not listed as a defendant. The complaint alleges that the brokerage firm’s activities went against its own conventions relating to moving the price on its screens in order to satisfy the demands of the trader. The movement of these prices by the broker was done “in the absence of market activity”.

The Complaint also states that Rivoire was directly overseeing the trader’s activity during the Pricing Call. During the pricing call Rivoire was on the trading floor while the trades we are being executed on the broker screens. While the effect of the trader’s transactions was impacting one of the broker screens determine the swaps pricing formula, prices were not affected on the other broker screen. This lack of combined price movement was not what Rivoire and the trader had expected. While the trader was threatening to never use the broker again if the prices weren’t moved, Rivoire was communicating to the Issuer on the pricing call that there were latency issues and the pricing of the swap had to be delayed until the “latency issues” were resolved. Rivoire also asserted on the call that “Obviously we are not controlling the screen.” Something the CFTC alleges is false.

The executing trader lamented Rivoire’s “oversight” by stating to another bank trader, “i mean, i had the head of rates standing over my shoulder going WTF IS GOING ON.”


One of the key elements in making the manipulation claim centers on the communications involved. If true, there are real issues as to the bank’s monitoring of the communications and what if anything was done to address those communications.

Another aspect of concern are the control functions in general. Mr. Rivoire is claimed to be a principal of the bank and a principal of a U.K. affiliate. Not only was Mr. Rivoire a principal he apparently was discussing this scheme with a “Co-Head of Rates” in Asia while instructing an underling to affect a price without market activity. And no one said no.

Lastly, it appears that Mr. Rivoire does not appear to be the only target in this manipulation case. Prominently mentioned were “Trader A”, a broker and his firm as well as a Co-Head of Rates. One of the allegations is aiding and abetting.  All in all, Rivoire was cited with manipulation, materially false and misleading statements, aiding and abetting liability and control person liability.

The Commission seeks civil monetary penalties and remedial ancillary relief, including, but not limited to, trading and registration bans, restitution, disgorgement, pre- and post-judgment interest, and such “other relief as the Court may deem necessary and appropriate”.


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