Washington, D.C. – ICAP Europe Limited has been slapped with a $65 million penalty by the U.S. Commodity Futures Trading Commission (CFTC) for its role in the manipulation of the London Interbank Offered Rate (LIBOR) for Yen, the agency announced on September 25, 2013.
The CFTC alleges that for over four years, from October 2006 to January 2011, ICAP brokers knowingly spread false information regarding Yen borrowing rates to manipulate the daily Yen LIBOR. LIBOR is a crucial benchmark interest rate impacting trillions of dollars in global transactions.
According to the CFTC’s order, ICAP brokers, including one internally known as “Lord LIBOR” or “Mr. LIBOR,” actively aided a senior Yen derivatives trader – initially at UBS Securities Japan Co., Ltd. and later at another unnamed bank – in their attempts to manipulate Yen LIBOR to benefit the trader’s positions. The brokers occasionally extended this unlawful conduct to benefit other derivatives traders as well.
ICAP, an interdealer broker, intermediates transactions between banks and other institutions. The company also provides market insight, including projections of LIBOR fixings, which were presented as unbiased assessments. However, the CFTC claims these projections were often deliberately skewed to reflect the preferred rates requested by the UBS Senior Yen Trader, who contacted ICAP brokers over 400 times seeking assistance with the manipulation.
The Order requires ICAP to pay the $65 million civil monetary penalty and cease any further violations. Additionally, ICAP and its parent company, ICAP plc, are required to implement measures to ensure the integrity and reliability of benchmark interest rate-related market information.
“ICAP and other interdealer brokers are expected to be honest middlemen,” stated David Meister, the CFTC’s Director of Enforcement. “Here, certain ICAP brokers were anything but honest. They repeatedly abused their trusted role when they infected the financial markets with false information to aid their top client’s manipulation of LIBOR.”
Source: CFTC.gov
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