Three traders, formerly of Rabobank, were charged in the United States for rigging benchmark interest rates over a five-year period. The traders, which were located in the United Kingdom, Australia, and Japan, were charged with conspiracy to commit wire and bank fraud, yet none of the traders are currently in custody.
According to the US government, the traders – along with others associated with Rabobank – made false yen LIBOR submissions to benefit their trading positions from 2006 to 2011. This is only one of many cases involving interest rate manipulation. Deutsche Bank AG, Barclays PLC and the Royal Bank of Scotland have been charged and fined for their involvement with rate manipulation.
The primary rates of choice for manipulation is the LIBOR, or the London interbank offered rate, and the ISDAfix, which are used to price interest-rate derivatives. These rates are used by banks to determine borrowing costs for business, mortgage and student loans.
Over the last year or so, the myriad of financial institutions have been either alleged by regulators or fined for market manipulation that span commodities, interest rates and forex markets.This brings to light the fear of many traders outside the financial industry that the market is rigged. And, indeed, it is. JP Morgan recently released that their profitability decreased 7.3 percent in the fourth-quarter primarily due to the billions in settlements and fines for manipulation, poor risk management and inability to conduct due diligence.