Wash trades 'not bribes', Hayes says at Libor trial

Alleged Libor manipulator Tom Hayes argues that his 2008–09 wash trades were aimed at maintaining a good relationship between UBS and its brokers, denying that they were bribes

Hayes says he tried to find the cheapest way for UBS to pay brokerage

Tom Hayes, the ex-UBS trader on trial in London for his alleged role in the Libor-rigging scandal, told the court today (July 9) that the wash trades he put on were aimed at preserving valuable relationships with brokers, rather than rewarding them for their help in pushing Libor higher or lower in his favour.

Earlier in the trial, the prosecution said Hayes would arrange with friendly brokers to put on two opposing trades at the same price point simultaneously – a tactic known as wash trades. The trades would have no effect on profit and loss for UBS, but served purely as a way to channel additional brokerage fees to the broker, the prosecution argued.

Hayes faces eight charges of conspiracy to defraud, to all of which he has pleaded not guilty.

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Hayes denied the trades were bribes. "I would say that a bribe is for doing something that you would not otherwise do – and I had been going to them for help with Libor for 18 months before the first wash trade took place," he said. Instead, Hayes argued, the trades were a way of continuing to provide income for the brokers in the absence of interbank liquidity after the collapse of Lehman Brothers.

"You can always do a trade at any price, but doing a deal like that would have cost UBS a horrendous amount in bid-offer spread," he said. "I was trying to find the cheapest way for UBS to pay brokerage."

The inference that "this was just for their help with Libor" was wrong, he said. "Brokers have a lot of power, they decide who gets the good deals ... what we call the gift deals – they will choose their most profitable clients."

Hayes also downplayed his own ability to influence UBS's Libor submissions, saying that for much of the time "I had very limited control over what UBS would submit". Fellow trader Roger Darin was in charge of submissions, and "he and I didn't see eye to eye", Hayes added. This limited his ability to deliver on agreements with other traders, such as RBS's Guillaume Adolph, to move submissions in each other's favour, he said.

The trial continues.