Remember when everyone decried wholesale Libor manipulation as a crazy conspiracy theory (Zero Hedge: January 2009: "This Makes No Sense: LIBOR By Bank" - after all, it was impossible for so many people to keep their mouth shut or whatever the generic justification is for disproving such "conspiracy theories"? Why, none other than ICAP chief Michael Spencer says they all though Libor was "unmanipulable." As it turns out, not only is Libor "manipulable", and a vast rate-rigging "conspiracy theory" is quite possible when everyone's interests are aligned, but it also is quite profitable, as ICAP just found out to its public humiliation. $87 million worth of humiliation.
Two quotes stand out from the just released, and quite humiliating, public filing:
- 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)
- 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.
And... introducing "Lord Libor" - ICAP's own Colin Goodman, who seems to have only one connection on LinkedIn - perhaps to King Eurodollar:
- READ and WILKINSON, along with [COLIN] GOODMAN himself, often referred to [COLIN] GOODMAN as "lord libor."
- On or about September 11, 2 007, GOODMAN sent an email message to READ that stated, "Hi Darrell Will be Looking to move these libors up tomorrow. 3m9 8 and 6m 1.07.. [signed] Mlord libor."
- On or about November 29, 2007, in an email exchange with the subject line "libors," READ told GOODMAN, "Welcome back M'Lord' Tom has been like a little lost sheep without you!!"
Some more choice quotes via FT:
Examples of ICAP Yen brokers’ Belief of their Influence on the Yen Market and the Yen LIBOR
“i hope that 6m 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. … p.s 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 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)
WILKINSON responded to GOODMAN: "I have been thinking of ways of sorting you out.If the needs be I will look into it on a bigger scale eg your salary package."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 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)
Below is the full complaint against ICAP