No link between wash trades and Libor skew, Hayes tells court

Former UBS trader Tom Hayes argues in court that he did not promise brokers lucrative wash trades in return for their help pushing the Libor benchmark in profitable directions

Tom Hayes

Wash trades intended to channel extra fees towards brokers were not a payoff for help rigging the Libor benchmark, former UBS trader Tom Hayes argued again in court today (July 15).

Hayes is appearing in London's Southwark Crown Court facing eight charges of conspiracy to defraud linked to the Libor-rigging scandal. He has pleaded not guilty to all charges.

Earlier in the trial, the court saw transcripts of online chats and telephone conversations between Hayes and various brokers (who cannot be named for legal reasons), in which he seemed to ask the brokers to push the day's Libor fixes higher or lower for his benefit. In exchange he apparently promised them large deals, or even wash trades – a practice of putting on two opposing trades at the same price point simultaneously – which would have no commercial benefit for UBS but would allow the bank to pay brokerage fees to the brokers. "If you keep fixes unchanged, I will do one humungous fucking deal with you," he told a broker at one point.

Libor trial: latest updates
Day-by-day coverage of Tom Hayes' Libor trial

But, under cross-examination by the prosecution today, Hayes denied there was any link. "Any deals I did with [the broker] were entirely a function of whether my book was doing OK," he said. And, he added, brokers in any case had little influence over Libor rates. "[The broker] didn't have the power to keep six-month Libor unchanged... I had no way of knowing what he did or if it affected my trade book at all." He told the brokers of his exposure to Libor because "the more money the [Hayes's] desk makes, the more brokerage we can afford to pay", he added.

The prosecution referred to another transcript from December 2008, in which Hayes discussed his need for a low Libor fix over the New Year period and offered a wash trade, and asked Hayes: "Don't you accept that you are rewarding him for his help in pushing Libor down?"

"No, I talk with him all the time, this is not some unique thing," Hayes replied. "I would not characterise this as a reward. Libor would have come off anyway over the [year-end] turn." And he argued that, in the context of a million-dollar monthly brokerage bill, individual deals worth only $30-60,000 to the broker's firm and $10-20,000 to the broker personally were "really quite minor". 

The prosecution also discussed an incident from 2006, when Hayes was still a trader with RBC. In a 2013 interview with the UK Serious Fraud Office after his arrest, Hayes said he had seen a US dollar Libor submission from UBS that he thought "was not completely accurate" and had reported it to his superiors. RBC dollar trader Mark Lowings had then called UBS under the pretext of asking for a bid/offer price quote, which had turned out to be "miles away" from the bank's Libor submission, and had also promised to report the incident to the British Bankers' Association, which at the time was responsible for Libor.

But in court today Hayes said that there was "no such thing as an accurate rate" for Libor and denied he had complained.

"You were complaining because you thought they were cheating you?" asked Mukal Chawla, the prosecution lawyer.

"No, it was just a fact of life that banks set rates commercially," Hayes replied.

The trial continues.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Financial crime and compliance50 2024

The detailed analysis for the Financial crime and compliance50 considers firms’ technological advances and strategic direction to provide a complete view of how market leaders are driving transformation in this sector

Investment banks: the future of risk control

This Risk.net survey report explores the current state of risk controls in investment banks, the challenges of effective engagement across the three lines of defence, and the opportunity to develop a more dynamic approach to first-line risk control

Op risk outlook 2022: the legal perspective

Christoph Kurth, partner of the global financial institutions leadership team at Baker McKenzie, discusses the key themes emerging from Risk.net’s Top 10 op risks 2022 survey and how financial firms can better manage and mitigate the impact of…

Emerging trends in op risk

Karen Man, partner and member of the global financial institutions leadership team at Baker McKenzie, discusses emerging op risks in the wake of the Covid‑19 pandemic, a rise in cyber attacks, concerns around conduct and culture, and the complexities of…

Moving targets: the new rules of conduct risk

How are capital markets firms adapting their approaches to monitoring and managing conduct risk following the Covid‑19 pandemic? In a Risk.net webinar in association with NICE Actimize, the panel discusses changing regulatory requirements, the essentials…

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here