UBS Libor-rigging: how brokers and traders colluded

‘Superman … be a hero today,’ one trader asked a broker as he requested a higher Libor rate. ‘I’ll try mate, as always’, was the answer

Emails, telephone calls and electronic chats were a crucial part of the damning evidence amassed in the UBS Libor-fixing investigation. As the Swiss bank paid £940m on Wednesday to settle the claims, they reveal the extent to which brokers and traders colluded in rigging the rate.

One exchange shows how UBS traders asked brokers to be a”superman” in helping to fix Libor, while another manager at the bank discussed the “mind fuck” of the rates. Even as he attempted to rig the figures, another pledged he was “a man of my word”.

Here are some examples:

In a telephone call on 18 September 2008, Trader A explained to Broker A of Broker Firm A: “If you keep 6s [i.e. the six month Japanese yen Libor rate] unchanged today … I will fucking do one humongous deal with you … Like a 50,000 buck deal, whatever. I need you to keep it as low as possible … if you do that … I’ll pay you, you know, 50,000 dollars, 100,000 dollars … whatever you want … I’m a man of my word”.

18 July 2007 Broker B at Broker Firm A contacted a submitter at Panel Bank 1 enquiring about Japanese Libor submissions that the bank was going to contribute. Broker B confirmed that the request came from Trader A at UBS. The conversation proceeded as follows:

Panel Bank 1 submitter: “Alright, well make sure he [Trader A] knows”

Broker B: “Yeah, he will know mate. Definitely, definitely, definitely”

Panel Bank 1 submitter: “You know, scratch my back yeah an all”

Broker B: “Yeah oh definitely, yeah, play the rules.”

27 January 2009, Broker A explained that he had been “… offering … some cheap 3s all morning and 1 shouted them down at [Panel Bank 3] as well … we were offering them at 50 mate … that wasn’t even true”.

24 January 2007, Trader A at UBS asked Manager A at UBS to “… try to keep 6m and 3m libors up”. Manager A responded: “Standing order, sir”.

19 January 2007 in an electronic chat, Trader A asked External Trader B at Panel Bank 3 to help him obtain a high three month Japanese Libor submission from Panel Bank 3 because he had “absolutely massive 3m fixes”. Trader A said: “Anytime i can return the favour let me know as the guys here are pretty accommodating [sic] to me”.

On 29 March 2007 Trader A asked what Japanese yen Libor submission UBS was going to set. Manager A: “Too early to say yet … prob[ably] .69 would be our unbiased contribution … as i said before – i dun mind helping on your fixings, but i’m not setting libor 7bp away from the truth i’ll get ubs banned if i do that, no interest in that”.

14 July 2009, Trader A requested of a broker in an electronic chat a higher Libor rate: “SUPERMAN … BE A HERO TODAY.” Broker F said: “ill try mate … as always.”

15 July 2009 in an electric chat Trader A requested: “3m and 1m unch [i.e. unchanged]”. Trader A also inserted an extract of another electronic chat with Broker A of Broker Firm A in which Broker A said: “putting the captain caos [sic] outfit on as we speak”.

21 July 2009, Trader A contacted Broker E of Broker Firm B who advised him to make small changes to his Libor submissions: “If you drop your 6M dramatically on the 11th mate, it will look v fishy, especially if [Panel Bank 5] and [Panel Bank 2] go with you. I’d be v careful how you play it, there might be cause for a drop as you cross into a new month but a couple of weeks in might get people questioning you.” Trader A replied: “Don’t worry will stagger the drops …”

The FSA’s report does not identify any of the individuals involved. But it shows how brokers – the middle men who take the temperature of the markets – helped set rates that suited UBS, “shouting down” submissions at other banks. The brokers talked to other banks, playing a key part in helping them decide what level they would submit to the Libor rate (the price at which they believed other banks would lend them money).

In what are “run throughs” of what was going on the market, the brokers were found to have given a view to other banks that suited UBS’s position.

The report focuses on “trader A” at UBS, who also asked brokers to make false bids and offers (referred to as “spoofs”) on cash trades in the market to skew perceptions of the rates at which cash could be borrowed or lent in the interbank market. There were also requests to change data on the electronic screens.

UBS conducted unnecessary trades with brokers – known as “wash trades” – in return for the help in fixing rates. “Broker A” received fees of more than £170,000 from UBS for helping to fix the rates which helped UBS traders to profit from other transactions. For period of at least 18 months, UBS made additional payments to Broker Firm B of £15,000 per quarter as a reward for the provision of a “fixing service”. Broker C received £5,000 a quarter for his particular “fixing service”. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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