The Australian Securities and Investments Commission, ASIC, has warned local and foreign financial institutions that it’s probing potential rorting of key benchmark financial instruments traded in the domestic market, including the S&P/ASX 200

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The ASIC investigation will examine potential manipulation of benchmarks like the S&P/ASX200 equity index and bank bill swaps.

The announcement comes after ASIC on Wednesday released a wide-ranging report into financial benchmarks, highlighting their importance to Australia’s markets and economy.

ASIC commissioner Cathie Armour said the agency had recently received a heightened level of enquiries about financial benchmarks.

“ASIC is very much on the job, we’re seeking to ensure that benchmarks in Australia are robust and reliable,” Ms Armour told reporters.

“We’re testing the conduct of financial institutions around key benchmarks, we’re formulating some forward looking recommendations for market participants… and we’re surveilling the regulatory changes that have happened overseas.

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The new investigation follows previous ASIC probes into misconduct in financial benchmarks that resulted in enforceable undertakings from UBS AG, BNP Paribas and the Royal Bank of Scotland.
Those institutions made voluntary contributions totalling $3.6 million to fund independent financial literacy projects in Australia.

Ms Armour said local and foreign market players would be rigorously tested by ASIC.

“That is what we think Australians would expect ASIC to do, and we are doing that,” she said.

“We aren’t in a position at this stage to say what the conclusions of that testing might be, we haven’t come to any conclusions quite yet.”

Ms Armour said misconduct uncovered overseas included trading that was designed to move a benchmark to favour an institution, and inappropriate client order-handling like seeking to trigger client losses.

She said ASIC was looking at whether bank bill swap rates – which up until 2013 were set by a panel of 14 financial institutions – had been manipulated prior to the change to an automated process.

“Yes we are investigating conduct before the time of that change, that is the conduct we’re testing,” Ms Armour said.

ASIC chairman Greg Medcraft urged financial institutions to cooperate more with the corporate regulator on the issue.

“We are finding often a very defensive approach taken with those that we talk to, frankly it’s not… in their best interest,” Mr Medcraft said.

“Like any policing agency, that tends to trigger our suspicion even more.”

Meanwhile, asked about the culture at troubled financial advice firm IOOF, Mr Medcraft said there appeared to be an issue about the current breach reporting regime.

IOOF on Tuesday fronted a senate inquiry into claims of widespread corporate misconduct among its staff, including insider trading and cheating on training exams.