Brokers suspended in LIBOR manipulation inquiry

February 9, 2012 at 09:30

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More than a dozen traders and brokers in London and Asia have been fired, suspended, or put on leave by their employers as a multinational probe into alleged manipulation of crucial global lending rates accelerates.

Regulators have been investigating US and European banks that help set interbank lending rates in London and Tokyo since late 2010, in an intensive profile inquiry that spans three continents and involves at least nine separate enforcement agencies.

In the last few months, officials have also expanded their enquiries to both hedge funds that place big bets on movements in those rates, and the interdealer brokers that serve as go-betweens with the banks, according to people familiar with the probe.

Icap, the world’s largest inter-dealer broker, has suspended one employee and put two more on administrative leave in the past six weeks. Icap, based in London, declined to comment beyond noting that it was “co-operating fully” with authorities and had disclosed the official requests for information late last year.
According to people familiar with the probe, traders have also been suspended, fired, or placed on leave in recent months at Deutsche Bank, JPMorgan Chase, Royal Bank of Scotland, and Citigroup. All four banks declined to comment.

Regulators are seeking to determine whether banks colluded to set the overnight lending rates known as Libor, Tibor, and Euribor, and whether traders within the banks and their clients improperly used information on what future rates would be to place profitable trades. The rates, which serve as a benchmark for $3.5 trillion worth of financial products worldwide, are set by a daily poll of a panel of banks in each region.

US and UK regulators have sought information from the three interdealer brokers that dominate the rates market — Icap, Tullett Prebon, and RP Martin. People familiar with the matter said they were looking at information-sharing among brokers, hedge funds and banks.

An RP Martin spokesman said the firm was not under investigation and declined to comment on suspensions. A Tullett Prebon spokesman said the firm had not suspended any employees.

Earlier this week UBS said it had been granted conditional immunity from the Swiss Competition Commission relating to its submissions for certain rates. The Swiss group was granted similar immunity by the US Department of Justice last year because it is co-operating with the probe.

“Derivative traders working for a number of financial institutions might have manipulated these submissions by co-ordinating their behaviour, thereby influencing these reference rates in their favour,” said a statement published by Switzerland’s Competition Commission last week. “Moreover, derivative traders might have colluded to manipulate the difference between the ask price and the bid price [spread] of derivatives based on these reference rates to the detriment of their clients.”

Barclays, which is already being investigated over alleged improper communications between traders and back office staff over its rates submissions, declined to comment on whether any employees have been suspended in London.