There was a time when big banks didn't let traders near the senior executive washroom. The fear was that traders are natural predators, risk-takers, rule-benders who would stop at nothing to make a buck. Shame was that in the nineties and noughties, trading edged out and subsumed the rest of every bank. Here is why the earlier bankers' instincts were right (taken from the FSA report into Barclays):
We have another big fixing tom[orrow] and with the market move I was hoping we could set [certain] Libors as high as possible.
Requests to move Libor rates were frequently accepted by Barclays’ submitters, who emailed responses such as this, written in response to a swaps trader's request for a high one-month and low three-month US Dollar Libor on March 16, 2006:
Other responses included the phrases: “always happy to help” and “Done…for you big boy”.
For you ... anything. I am going to go 78 and 92.5. It is difficult to go lower than that in threes. looking at where cash is trading. In fact, if you did not want a low one I would have gone 93 at least.March 16, 2006, submitter's response to swaps trader's request for a high one-month and low three-month US Dollar Libor
[Senior trader] owes me! February 7, 2006, submitter's response when swaps trader called him a "superstar" for moving Barclays' US Dollar Libor submission up a basis point more than the submitter wanted and for making a submission with the intent to get "kicked out"According to the CFTC senior managers even coined the phrase “head above the parapet” to describe putting in high Libor submissions relative to other banks.
Sometimes, the traders asked the submitters to try to have Barclays excluded from the Libor calculation altogether by deliberately falling into the top or bottom quartile, in an attempt to influence the official fixing. Sometimes the requests covered several days or even weeks of submissions at a time.
WE HAVE TO GET KICKED OUT OF THE FIXINGS TOMORROW!! We need a 4.17 fix in 1m (low fix) We need a 4.41 fix in 3m (high fix) November 22, 2005, senior trader in New York to trader in London
You need to take a close look at the reset ladder. We need 3M to stay low for the next 3 sets and then I think that we will be completely out of our 3M position. Then its on. [Submitter] has to go crazy with raising 3M Libor. February 1, 2006, trader in New York to trader in London
Your annoying colleague again ... Would love to get a high 1m Also if poss a low 3m... ifposs ... thanks February 3, 2006, trader in London to submitter
This is the [book's] risk. We need low 1M and 3M libor. PIs ask [submitter] to get 1M set to 82. That would help a lot March 27,2006, trader in New York to trader in London
Hi Guys, We got a big position in 3m libor for the next 3 days. Can we please keep the libor fixing at 5.39 for the next few days. It would really help. We do not want it to fix any higher than that. Tks a lot. September 13, 2006, senior trader in New York to submitter
For Monday we are very long 3m cash here in NY and would like the setting to be set as low as possible ... thanksDecember 14, 2006, trader in New York to submitter
PIs. go for 5.36 Libor again tomorrow, very long and would be hurt by a higher setting ... thanks. May 23, 2007, trader in New York to submitter
The following are just some of the numerous examples of the communications between the traders and submitters:
June 1, 2006: Senior euro swaps trader: "Hi [Euribor Submitter], is it too late to ask for a low 3m?"
Euribor submitter: "Just about to put them in ..... so no."
September 7, 2006: Senior euro swaps trader: "I have a huge 1m fixing today and it would really help to have a low 1m tx a lot."
Euribor submitter: "I'll do my best."
Senior euro swaps trader: "because I am aware some other banle need a very high one ... .if you could push it very low it would help. I have 50bn fixing."
October 13, 2006: Senior euro swaps trader: "I have a huge fixing on Monday ... something like 30bn 1m fixing ... and I would like it to be very very very high ..... Can you do something to help? I know a big clearer will be against us ... and don't want to lose money on that one."
Euribor submitter forwarded the request to another Euribor submitter, advising: "We always try and do our best to help out. .... "
Senior euribor submitter to senior euro swaps trader: "By the way [euribor submitter] tells me that it would be good to see a high lmth fix on Monday, we will pay for some cash that morning so hopefully that will help."
January 12, 2007: Senior euro swaps trader: "hi [Euribor submitter]. we need a low 1m in the coming days if u can .... "
Senior euribor submitter: "hi [senior euro swaps trader], we will keep the 1mth low for a few days."
April 2, 2007: Euro swaps trader: "hello [Senior Euribor Submitter], could you please put in a high 6 month euribor today?"
Senior Euribor submitter: "will do."
July 29, 2008: Euro swaps trader to senior euro swaps trader: "I was discussing the strategy [to get a high fixing] with [Senior Euribor Submitter] earlier this morning - today he will stay bid in the mkt and put a high fixing but without lifting any offer, and then he will be really paying up for cash tomorrow and Thursday which is when the big positive resets are."