Nomura Trader Gamed Interest-Rate Swap Spreads, CFTC Claims

(Bloomberg) -- Nomura’s former head of non-yen rate trading was sued by the U.S. Commodity Futures Trading Commission for allegedly manipulating the price of U.S. dollar interest-rate swap spreads.

John Patrick Gorman III “engaged in this scheme in order to benefit the bank” in a transaction with a bond issuer, according to a lawsuit filed in U.S. District Court in Manhattan on Monday. The suit didn’t identify the bank by name. Gorman is employed by Nomura but is no longer trading, according to a person with knowledge of the matter, who asked not to be identified.

A Nomura spokesman declined to comment on the allegations. Gorman didn’t return an email seeking comment.

The bond issuer, which the CFTC didn’t identify, entered into a rate swap transaction with a Japanese affiliate of the bank in connection with a dollar-denominated bond issuance with a 10-year maturity, according to the suit. The bond issue and the swap were both priced on Feb. 3, 2015, using data from a screen that showed prices from an electronic trading platform.

Gorman timed his trading to artificially move down the price of 10-year swap spreads, which was then used to price the issuer swap, resulting in profits for Nomura, the CFTC claims. It alleges that in 2019, during a CFTC investigation into the matter, Gorman destroyed communications about the trading on the WhatsApp messaging service.

The case is Commodity Futures Trading Commission v. Gorman, 21-cv-00870, U.S. District Court, Southern District of New York (Manhattan).

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