CFTC, FCA fine ICAP £55m over Libor rigging scandal
The first broking firm to be fined for failings related to the critical benchmark interest rate.
The US Commodity Futures Trading Commission (CFTC) and the UK Financial Conduct Authority (FCA) have imposed a civil monetary penalty of £41m and £14m respectively on inter-dealer broker ICAP Europe over London Interbank Offered Rate (Libor) rigging scandal.
In its investigation, the CFTC found that staff at ICAP intentionally circulated false and misleading information concerning Japanese Yen borrowing rates to market participants on its derivatives and cash desks to manipulate the official fixing of the daily Yen Libor between October 2006 and January 2011.
The US agency also found that the UBS senior Yen trader called on ICAP Yen brokers more than 400 times for assistance in rigging Yen Libor.
As per the CFTC order, the ICAP brokers referred to the panel bank submitters as ‘sheep’ when they copied the Yen cash broker’s Suggested Libors, while at least two banks’ submissions reflected the Suggested Libors up to 90% of the time.
David Meister, director of enforcement at CFTC, said: “Certain ICAP brokers repeatedly abused their trusted role when they infected the financial markets with false information to aid their top client’s manipulation of Libor.”
The FCA in its investigation found that ICAP Europe has violated its Principles for Businesses. It also found that ICAP Europe brokers conspired with traders at UBS to manipulate the Japanese Yen Libor rates for the benefit of the traders. Moreover, ICAP Europe did not audit its derivatives and cash desks from October 2006 to November 2010.
The British agency noted that UBS made at least 330 written requests to ICAP Europe brokers for inappropriate submissions, apart from oral requests.
Tracey McDermott, director of enforcement and financial crime at FCA, said: “The misconduct in relation to Libor has cast a shadow over the financial services industry. This is our fourth penalty in relation to Libor and our investigations continue. The lessons however go far wider than Libor and we will take a very dim view of those who do not learn them.”
ICAP Europe, a subsidiary of UK-based ICAP, is being run by the former Conservative Party treasurer Michael Spencer. It is the first broking firm to be fined for failings relating to Libor, a critical benchmark interest rate used worldwide as the basis for trillions of dollars of transactions.