Trader charged with rigging Libor says outcomes were random

By: | Published: July 17, 2015 8:43 AM

Ex-trader Tom Hayes on Thursday told a London court where he is on trial for rigging Libor that his attempts to influence benchmark interest rates had resulted in "random" outcomes that had not benefited his trading positions over time.

Ex-trader Tom Hayes on Thursday told a London court where he is on trial for rigging Libor that his attempts to influence benchmark interest rates had resulted in “random” outcomes that had not benefited his trading positions over time.

The former yen derivatives trader at UBS and Citi , who denies eight counts of conspiracy to defraud between 2006 and 2010, said he did not know to what extent Libor submitters had been influenced by the requests he made.

“The outcomes over the whole population of data are completely random,” he told Southwark Crown Court.

London interbank offered rates (Libor) are formed based on submissions from a panel of banks. Rigging the rates could potentially have far-reaching effects as $450 trillion of financial products worldwide are referenced to them.

Hayes has not denied that he sought to influence the Libor submissions of his and other banks to suit his trading positions. His defence is that he was open about this, it was common in the industry, his managers encouraged the practice and he did not think he was doing anything dishonest.

In cross-examination, prosecutor Mukul Chawla asked Hayes questions about an electronic chat dated July 2009 in which he asked a broker for help in influencing a Libor submission from HSBC, a rival bank to UBS where Hayes then worked.

“Mate you gotta help with HSBC … Please if 1 (one-month yen Libor) goes up 2 basis points … no one will notice,” Hayes wrote to the broker, who cannot be named for legal reasons.

Chawla asked Hayes: “Did you think it was honest to interfere with HSBC’s submission?”

“These were just favours, I couldn’t force anyone,” Hayes responded. “You don’t know what submitters did or didn’t do as a result of anything I said.”

“WHITER THAN WHITE”

Hayes repeatedly complained that he had not been given records of his profit and loss account that would allow him to rebut the charges against him by showing that his attempts to influence Libor did not result in consistent gains for him.

He was asked questions about a 2008 electronic chat with a colleague, read out in court, about a broker who had previously helped Hayes try to influence submissions.

“(The broker) is getting concerned about how we are approaching him re libors,” one of his colleagues told Hayes.

“He has warned me again that compliance are all over the cash market again and he has to appear whiter than white. Text messages are OK but my emails need to be worded very carefully.”

The broker and his colleague cannot be named for legal reasons.

Hayes told the court he did not take that as a warning sign that he was doing anything wrong because if he had, his pattern of behaviour would have changed, and in fact it did not.

“I keep putting everything in writing, I keep calling down the line,” he said, describing what happened next.

Chawla concluded four days of cross-examination by asking Hayes about an exchange about Libor submissions with a trader at a rival bank, dated June 2009.

“My guys (Libor submitters) wouldn’t even discuss it with me due to ‘legal reasons’. So can’t even get an idea of their thoughts on the matter,” the trader wrote to Hayes.

“OK they sound like pricks,” Hayes wrote back.

Chawla asked him: “Was that your opinion of people who behaved honestly?”

“No, not at all,” Hayes said, adding that he had merely been asking for the submitters’ opinion about where Libor was heading and did not see why someone could not give an opinion.

“It has nothing to do with honesty or dishonesty,” he said.

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