September 25, 2013 2:25 pm

Libor: The email trail

ICAP, the world’s largest interdealer broker, has been fined £55m by US and UK regulators over its role in the Libor rigging scandal.

The regulators said the group’s brokers conspired with a UBS rates trader to “knowingly disseminate false and misleading information” about yen borrowing rates to other banks. Their goal was to influence the submissions that those banks made to the daily Libor rate-setting panel so that the final rate, which was based on an average of all the banks estimates, would help the UBS trader make money on derivatives, the regulators said.

Here are the highlights of some of the emails that led them to be penalised:

Examples of ICAP Yen brokers’ belief of their Influence on the yen market and the Yen Libor:

“i hope that 6m [six-month] Libor has got me back in your good books!! used all my powers of persuasion on that one ;-) … think [Bank A and Bank B] must have looked at [Cash Broker A’s] first suggestion ... they both moved up 11bps to 1.10”

“[Cash Broker 1] sending out higher than he thinks so hopefuly the sheep will just copy”

Examples of skewed Libor suggestions made for UBS senior yen trader:

Derivatives Broker 1: “Morning Lad [Cash Broker 1], On the scrounge again, if possible keep 3m the same and get 6mos as high as you can. My guy has an enormous fix on Wednesday in 6mos and will want it as high as possible. Waiting for my credit card to get returned to me from a drunken night out bowling, but will be supplying you with copious amounts of curry on it’s imminent return. Cheers” (October 23 2006)

Derivatives Broker 1: “Hi [Cash Broker 1], Thanks again for all your efforts … Can you do your best to drive these Libors higher,especially 3 mos if you can and it is still well bid. ... UBS had to stagger their move up but will definitely be in the count today. … ps Bubbly on its way with [Senior Yen Trader]” (December 7 2007)

Derivatives Broker 1: “Make 6m go lower! They r going up. [Senior yen trader] will buy you a Ferrari next yr if you move 3m up and no change 6m” (February 29 2008, via text message to personal mobile phone)

Examples of compensation demands for ICAP yen broker’s “Libor services”

Cash Broker 1: “Life is tough enough over here without having to double guess the Libors every morning and get zipper-de-do-da. How about some form of performance bonus per quarter from your b bonus [sic] pool to me for the Libor service ...”

Yen Desk Head: “Lord Baliff, I would suggest a lunch over golden week. Monday or Tuesday if you are around ... As for kick backs etc we can discuss that at lunch and I will speak to [senior yen trader] about it next time he comes up for a chat.” (April 18, 2007)

Derivatives Broker 1: [Yen desk head] “THIS IS GETTING SERIOUS [Senior yen trader] IS NOT HAPPY WITH THE WAY THINGS ARE PROGRESSING HE IS GOING TO HAVE A WORD WITH [competing broker] TO RECTIFY THE SITUATION. CAN YOU PLEASE GET HOLD OF [Cash broker 1] AND GET HIM TO SEND OUT 6 MOS LIBOR AT 0.865 AND TO GET HIS BANKS SETTING IT HIGH. THIS IS VERY IMPORTANT BECAUSE HE IS QUESTIONING MY (AND OUR) WORTH … GET 6MOS HIGH PLEASE.” (April 19 2007)

Examples of involvement by multiple brokers in manipulative conduct:

Cash Broker 1: “U will love these libors !! … mlord”

Derivatives Broker 1: “Fantastic work”

Cash Broker 1: “Who knows where they might end ……. … Best mark them high …..too [sic] start with”

Derivatives Broker 1: “yeh they copied your man [Cash Broker 2] yesterday so lets hope they do the same today … Thanks mate” (August 16 2007)

Examples of yen brokers’ direct manipulative contact with panel banks:

Derivatives Broker 1: “brooliant!! they are making fortunes with these high fixings!!! :-) thats UBS, RBS and [Bank E] + M’Lord should be ok!!” (August 23 2007)

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