The Fix – meet the Libor scandal’s ‘Trader A’
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Foreign Exchange

The Fix – meet the Libor scandal’s ‘Trader A’

The story of convicted Trader A – Tom Hayes – lays bare the actions of a few cliques that masterminded the headline-grabbing Libor scandal, but despite Hayes’ conviction it is still notoriously difficult to pin blame on individual traders even if a firm admits wrongdoing.

The Fix follow Hayes’ journey from 'cocoa-sipping, blankie-clutching eccentric'
to an 'aggressive and formidable trader' 

Tom Hayes needs no lengthy introduction. The ghostly pale former rates trader is firmly entrenched in the public consciousness as the first banker to be jailed over the Libor scandal.

Hundreds of articles have been written about how traders such as Hayes colluded to rig the ‘world’s most important number’, the rate at which banks lend to one another.

Now, Bloomberg journalists Liam Vaughan and Gavin Finch bring everything together in one book: The Fix. Even if you’re well-versed in the Libor rigging story, it makes for a riveting read.

We follow Hayes’ journey from a young “cocoa-sipping, blankie-clutching eccentric” – landing him the nickname Tommy Chocolate – to an “aggressive and formidable trader” that ends up in prison.

Hayes is appealing to the Criminal Cases Review Commission to have his sentence overturned, having lost a previous appeal and been blocked from appealing to the Supreme Court. His crowdfunding campaign to help clear his name is appealing for £150,000. So far, it has raised £78,000.

The Fix details how frighteningly simple it was for Hayes to encourage others to skew their firm’s Libor submissions in exchange for kickbacks, anything from a curry to hard cash. 

For all its deep analysis of how traders gamed Libor, the book is really a story about how the past has a dogged way of catching up with the present

The book might not do Hayes any favours, but it also casts a dim light on pretty much everyone else in his sphere, from his colleagues at brokerage firms, bank managers, financial regulators, the foreign exchange and money markets committee at the British Bankers’ Association (BBA) to top Bank of England officials.

The authors give us juicy nuggets of information about those in charge, such as the fact that John Ewan, former director responsible for Libor at the BBA, had no previous banking experience upon taking the job.

Ewan admitted in his testimony during Hayes’ court case that much of what was discussed during BBA meetings went straight over his head, according to the book.

Somewhat predictably, the Americans save the day.

The Fix is heavy on detailing the dry hierarchy of the US’s regulatory agencies that kick-start the investigations, and perhaps lacks as many cheap thrills as recent page-turners such as John LeFevre’s Straight to Hell – which, ironically, was about the comparatively staid world of bond syndication. However, there are enough saucy anecdotes amid the technical details to keep the reader entertained.

The authors confidently take the reader on a journey down history lane, detailing the origins of Libor, its evolution to the world’s most important benchmark rate and its flagrant manipulation, all the while weaving in rich personal detail about the faces behind the world’s largest trading desks. M’Lord, Little Hoshino and, of course, Tommy Chocolate – the cast of characters doesn’t fail to disappoint.

The Fix edges its way to its inevitable conclusion at around chapter 14 – Just Keep Swimming – bringing us to the crux of the book. For all its deep analysis of how traders gamed Libor, the book is really a story about how the past has a dogged way of catching up with the present.

Hayes is fired from his lucrative trading job at Citi in Tokyo – yet keeps his $3 million signing bonus – and returns to the UK with his bride to make a fresh start. However, the harder Hayes tries to escape his murky past – settling in the pretty Surrey village of Woldingham, becoming a father and joining a respectable MBA programme – the more it knocks on his door until one day the police barge through that door with an arrest warrant.

Worst trade

His winning streak comes to an abrupt end when he makes the worst trade of his life and pleads not guilty to all criminal charges.

Ambitious graduates joining the City can read every compliance manual on the banks’ bookshelves, or they could just read this book. It’s one thing to lose your job and become a social pariah; it’s another to do jail time.

As the regulators closed in on Hayes and his cohorts to terminate the Libor loophole, the secrets of the inner workings of the $5 trillion dollar FX market emerge. Different names and faces, but essentially the same story. A cadre of (mostly) men gaming a benchmark rate to suit their own book and boost their coffers.

Bank fines, apologies and criminal investigations have been doled out, but have lessons been learnt? Certainly the regulators have played catch-up, but, as The Fix details, it is impossible and prohibitively expensive to keep tabs on everyone.

Barclays’ own internal investigation into its Libor practices – which was delegated to it by the Commodity Futures Trading Commission (CFTC) – included reviewing 22 million documents, interviewing 75 people and listening to more than one million audio files, according to the book.

“The total cost was £100 million – more than half the CFTC’s entire annual budget,” the authors write. “Libor was just one of hundreds of probes carried out by the CFTC each year and, with dozens of banks in its purview, it had no choice but to delegate.”

Even when individuals are caught, it can be hard to secure a conviction without a watertight case and a jury that can stay awake – jurors fell asleep at the trial of the six interdealer brokers accused of colluding with Hayes. All six were found not guilty.

And in the UK, it might be about to get even tougher.

On Thursday, the Financial Conduct Authority and Prudential Regulation Authority announced an overhaul of their enforcement decision-making processes that some think will cause cases to drag on longer and allow both firms and individuals to more easily contest cases in private, while retaining the opportunity to pay a heavily discounted fine. 

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