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inter-bank offers in a reasonable market size just prior to 11:00 a.m.
(London time)?” Once rates are submitted, the highest 25 percent and
lowest 25 percent are discarded and the remaining submissions are
averaged. The final calculations are released each day at about 11:30 a.m.
One of the questions that Congressional hearings need to address is
why the American consumer’s financial welfare is based on an interest rate
index they’ve never heard of, set on the other side of the Atlantic Ocean
and overseen by a decidedly biased trade association, the British Bankers
Association.
The opportunity to illegally profit by rigging Libor is mammoth.
According to the key regulator for futures and derivatives here in the U.S.,
the Commodity Futures Trading Commission (CFTC), “…approximately
$350 trillion of notional swaps and $10 trillion of loans are indexed to
LIBOR. LIBOR also is the basis for settlement of interest rate futures and
options contracts on many of the world’s major futures and options
exchanges, including the three-month and one month Eurodollar contracts
on the Chicago Mercantile Exchange (CME). The total traded volume of
the CME Eurodollar contract had a notional value of over $437 trillion in
2009 and $564 trillion in 2011.”
If a traders knows, or suspects, where Libor is to be set, he can make
enormous trading profits for the proprietary trading desk (the desk that
bets for the house) at big Wall Street firms and other global banks.
And here is a small sampling of the email evidence that prosecutors
have released so far, showing that making profits for the house was at the
core of this rigged game. The emails below were coming from traders on
the proprietary desks of the firms who were supposed to be behind the socalled
Chinese Wall, barred from knowing or instructing on what Libor
rates would be submitted by other bank personnel. (The small “m” in the
emails means “month.”)
“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);