UBS E-Mails Show How Traders Gamed the System

LONDON â€" For some traders, trying to manipulate a global interest rate benchmark was somehow heroic.

“Be a hero today,” a trader at UBS asked (in all caps) a broker at another firm in 2009 when the two discussed a specific inter-bank lending rate in an e-mail. But the financial regulators found little heroism in the conduct.

The exchange is among the colorful and brazen e-mails between UBS traders and brokers outside the firm that were published on Wednesday by the Financial Services Authority of Britain. The F.S.A. and other global regulators reached a $1.5 billion settlement with the Swiss banking giant over a multiyear scheme to manipulate interest rates.

In an exchange in July 2007, a broker was told to make sure the trader at UBS knows that he owes a favor:

Panel Bank 1 submitter: â €œAlright, well make sure he [Trader A] knows.”

Broker B: “Yeah, he will know mate. Definitely, definitely, definitely.”

Panel Bank 1 submitter: “You know, scratch my back yeah an all”

Broker B: “Yeah oh definitely, yeah, play the rules.”

In another exchange on July 29, 2009, a trader who was not working for UBS received a warning about a future change in a six-month rate.

The trader “could be in for a shock going into August,” the broker said, according to the F.S.A. documents. “the three muscateers [sic] could do him a fair bit of damage.”

The reference to the three musketeers was to individuals at three banks, including UBS, according to the regulator.

The e-mails show the close relationship between UBS traders and employees at other banks and brokers involved in the setting of the yen-denominated Libor.

A UBS trader who was handling interest rate derivatives made 39 requests in July 2009 to an unidentified brokerage firm. In one request about a six-month rate, requested a “high 6m superman … be a hero today.” To which the broker replied “Ill try mate … as always”, the F.S.A. documents showed.

There was also some joking in the exchanges. During a chat by the same trader with a different broker, the broker said: “putting the captain caos [sic] outfit on as we speak”.

Similar e-mail exchanges were released when regulators reached a $450 million settlement with Barclays in June over rate manipulation. In those exchanges, traders had called each other affectionately “big boy” and promi sed each other bottles of Bollinger champagne for their help in fiddling with the rate.

Yet some of the UBS e-mails released on Wednesday were much cruder.

One UBS trader openly discussed paying the broker for his help on trying to move the benchmark rate.

In an e-mail exchange on Sept. 18, 2008, the trader wrote “If you keep 6s [referring to the six-month yen Libor rate] unchanged today … I will [expletive] do one humongous deal with you … Like a 50,000 buck deal, whatever … I need you to keep it as low as possible … if you do that …. I'll pay you, you know, 50,000 dollars, 100,000 dollars… whatever you want … I'm a man of my word”, according to the F.S.A. document.