Not Libor manipulators. Possibly not even bros. But guys playing beer pong anyway. Photographer: Ethan Miller/Getty Images for Nightclub & Bar Media Group
Not Libor manipulators. Possibly not even bros. But guys playing beer pong anyway. Photographer: Ethan Miller/Getty Images for Nightclub & Bar Media Group

There keep being Libor settlements, and they keep getting more ungrammatical and postmodern. The latest is London interdealer broker RP Martin settling with the U.S. Commodity Futures Trading Commission and the U.K. Financial Conduct Authority over claims that it manipulated yen London interbank offered rates. Here are some characters that people typed, in the order in which they typed them:1

[UBS] Senior Yen Trader: 1m mate *** whats it looking like need ity lower
[RP Martin] Yen Broker 1: lower
Senior Yen Trader: rabo moved UP to 71 they are offered at 49!
Yen Broker 1 : ill have a work with rabo agn then
Senior Yen Trader: please have a word that is wrong
Senior Yen Trader: [Yen Broker 1] have you spoken to rabo re his 1m fix its a joke i need your help on 1m icap are suggesting 63 today pis do the same
Yen Broker 1: ok mate il. do tyeh same i did iyt yesterday too
Senior Yen Trader: thx its killing me mate i am losing so much cash then i can't pay you
Yen Broker 1: thats is not gonna help anyone [Yen Broker 2] is trying to pull a favour with rabo now
Senior Yen Trader: ta
Yen Broker 1: roite yu owe him a beer wednesday h [Yen Broker 2] 63 rabo going ok?> fosters top he likes extra chilled
Senior Yen Trader: ok mate ta for that dude

So UBS got RP Martin to convince its other bank clients to change their Libor submissions to help UBS's derivatives trades, in exchange for frosty beers. But RP Martin was not paid principally in beers for manipulating Libor on behalf of Senior Yen Trader (which appears to be a pseudonym for Tom Hayes, a yen rates trader at UBS). It was paid in bro. Bro is apparently commission for intermediating wash trades, and can you think of a better name for it than that?

[UBS] Senior Yen Trader: ***have you got any mates, mate, who'll do you like a net trade and I could like, you know, basically give you like [...2 ], I don't know, a trillion 3-month LIBOR/TIBOR and take back a trillion 3-month LIBOR/TIBOR and, obviously, you're net it with the other guy.

[RP Martin] Yen Broker 1: Right.

Senior Yen Trader: Do you know what I mean? I was thinking we could do something like that. That's probably the easiest thing. *** what I'm saying is, look, that if you've got a mate who will like do a flat switch basically. *** I'd go in and out with him, yeah? So I'll pay them in two years or whatever and I'll receive from them in two years. The coupon's the same. *** I'll get charged bro both sides obviously.


Yen Broker 1: all right. That's excellent

These wash trades required another bank to take the other side, entering into offsetting transactions with UBS using RP Martin as a broker. Usually that bank was the Royal Bank of Scotland. RBS wouldn't be charged a spread (UBS would pay both sides), or take any market risk (the transactions would offset), though I suppose grossing up your derivative notional exposure to UBS by a trillion yen is not, like, completely costless. Plus there's paperwork to fill out. But what RP Martin received in bro and beers, it paid in lunches:

Yen Broker 3: Right, geez, can you do me a favor? You, um, what -- you're not going to get paid any bro for this and we'll send you lunch around for the whole desk. Can you flat -- can you switch, er, two years semi at 5 3/4, 100 yards, are you -- between UBS. Just get -- take it from UBS, give it back to UBS. He wants to pay some bro. We won't bro you but he wants to put -- he wants to give us some bro.
RBS Yen Trader: Yeah, Yeah.
Yen Broker 3: 100 yards, right?
RBS Yen Trader: Yeah. Yeah. UBS on UBS? Right.
Yen Broker 3: Yeah, Yeah. 100 yards -- actually can you make it 150 and I'll send lunch around for everybody?

On another wash trade the RBS guy was promised that he'd "be looked after in Vegas," presumably with healthy lunch recommendations.3

Honestly, most of the substance here has come out before in previous settlements -- with UBS, RBS and Rabobank -- so you won't learn too much new stuff here, except the term "bro," which is pretty great.4 But the RP Martin settlement does give you a sense of just how fragile, and vulnerable to manipulation, Libor was.

Sometimes RP Martin helped UBS manipulate Libor through conspiratorial means: calling up other banks' Libor submitters and begging them to make Libor higher or lower. But mostly RP Martin helped UBS manipulate Libor through misuse of its brokering function. From the FCA:

Brokers at Martins were in regular contact with Panel Banks. On occasion, they provided Panel Banks with “Run-Throughs”. A Run-Through was Martins’ assessment (purportedly based on the knowledge it had gained through its participation in transactions in the market and its general view of the market) of the correct level of JPY LIBOR. ...

Broker A also attempted to influence JPY LIBOR submitters by providing misleading Run-Throughs. They were misleading because they did not reflect his independent assessment of the market but instead took into account JPY LIBOR levels requested by Trader A.

Now of course, when a panel bank made a Libor submission, it was supposed to be submitting the rate at which it "could borrow funds, were it to do so by asking for and then accepting interbank offers in reasonable market size just prior to 11:00 London time.” One might think that a bank's cash management desk would know better where it could borrow money than an interdealer broker, but that would only be true if the bank actually borrowed money in the Libor market. In fact, Libor was "the rate of interest at which big banks don't lend to each other," so many of the banks relied on the brokers to tell them the rate at which they could borrow money if they could borrow money at that rate. You could see why this would be a pretty fake exercise.

And if imaginary run-throughs didn't work, there was always the option of offering banks the opportunity to borrow (or lend) at an imaginary Libor. This is just kind of weird:

Yen Broker 1, acting on behalf of the Senior Yen Trader, disseminated false bid prices that he called "fictitious" or "spoof" bids. The Senior Yen Trader encouraged such spoof bids, believing that if Yen LIBOR submitters heard over the squawk box that banks were willing to trade Yen cash at the fictitious price, they might factor that information into their determination of their LIBOR submissions and as a result be more likely to move their Yen LIBOR submissions that day in a manner that could benefit the Senior Yen Trader.

Here's an example:

Yen Broker 1: [shouting over squawk box] I got 88 choice here 3's Yen [Bank 1 Yen LIBOR Submitter] at the moment, 88 either way.

In a functioning market, you shouldn't be able to offer an off-market quote at choice (same price to buy or sell) to a big bank just to manipulate prices. That big bank would trade with you at an off-market price, close out the trade at a market price, and make free money.5 The fact that no one bothered to hit or lift RP Martin's quote here is just odd, and shows how atrophied the Libor market was. If a commodity never actually trades, you can pretty much make up any price you want for it. So RP Martin did.

1 I mean, the CFTC interpolated the bracketed bits in the text, and the ***'s (for ellipses). The names are also the CFTC's pseudonyms, though I've bracketed in where they worked.

2 Here a word is omitted. I bet you can guess what it is! Anyway it's on page 16 here if you can't. It does not significantly change the meaning.

3 A fun exercise is to work out the bro/lunch exchange rate. The CFTC says that RP Martin made "more than $412,000 in commission revenue" on nine wash trades; if you figure that each trade washed around $50,000 in bro for RP Martin then, I mean, I hope those lunches weren't from Pret.

4 [Update: Fine, whatever, it's short for "brokerage."] Additional linguistic explanation for American readers can be found here.

5 I guess if they tried to trade with you you could say "nononono that was a fictitious bid, see," but if you make your living as a broker you probably shouldn't do that very often.

To contact the writer of this article: Matt Levine at

To contact the editor responsible for this article: Tobin Harshaw at