ASIC announced that it has today commenced legal proceedings in the Federal Court in Melbourne against the Commonwealth Bank of Australia (CBA) for unconscionable conduct and market manipulation in relation to CBA’s involvement in setting the bank bill swap reference rate (BBSW) between 31 January 2012 and October 2012.
The BBSW is the primary interest rate benchmark used in Australian financial markets and was administered by the Australian Financial Markets Association (AFMA) during the relevant period. On 27 September 2013, AFMA changed the method by which the BBSW is calculated. The conduct that the proceedings relate to occurred before this change in methodology. Since 1 January 2017 ASX Limited has been the administrator of the BBSW, introducing a new Volume Weight Average Price (VWAP) based calculation methodology.
During the relevant period CBA had a large number of products which were priced or valued off BBSW. ASIC alleges that on three specific occasions CBA traded with the intention of affecting the level at which BBSW was set so as to maximise its profits or minimise its losses to the detriment of those holding opposite positions to CBA’s.
ASIC alleges it was unconscionable for CBA to trade in this way, and also to enter into products priced off the BBSW without disclosing its trading practices to its customers and counterparties. ASIC also alleges that CBA’s trading created an artificial price and a false appearance with respect to the market for some of these products.
The complete announcement can be seen here.