Was Tom Hayes Running the Biggest Financial Conspiracy in History? Or just taking the fall for one? On a deserted trading floor, at the Tokyo headquarters of a Swiss bank, Tom Hayes sat rapt before a bank of eight computer screens. Collar askew, pale features pinched, blond hair mussed from a habit of pulling at it when he was deep in thought, the British trader was even more disheveled than usual. It was Sept. 15, 2008, and it looked, he would later recall, like the end of the world. Hayes had been awakened at dawn in his apartment by a call from his boss, telling him to get into the office immediately. In New York, Lehman Brothers was plunging into bankruptcy. At his desk, Hayes watched the world process the news and panic. Each market as it opened became a sea of flashing red as investors frantically dumped their holdings. In moments like this, Hayes entered an almost unconscious state, rapidly processing the tide of information before him and calculating the best escape route. Hayes was a phenom at UBS, one of the best the bank had at trading derivatives. All year long, the financial crisis had been good for him. The chaos had let him buy cheaply from those desperate to get out and sell high to the unlucky few who still needed to trade. While most dealers closed up shop in fear, Hayes, with his seemingly limitless appetite for risk, stayed in. He was 28 years old, and he was up more than $70 million for the year. Featured in Bloomberg Businessweek, Sept. 21-27, 2015.Subscribe now. Photographer: Andrew Parsons/i-Images/Polaris Now that was under threat. Not only did Hayes have to extract himself from every deal he’d done with Lehman, but he’d also made a series of enormous bets that in the coming days, interest rates would remain stable. The collapse of the fourth-largest investment bank in the U.S. would surely cause those rates, which were really just barometers of risk, to spike. As Hayes examined his tradebook, one rate mattered more than any other: the London interbank offered rate, or Libor, a benchmark that influenced $350 trillion of securities around the world. For traders like Hayes, this number was the Holy Grail. And two years earlier, he had discovered a way to rig it... http://www.bloomberg.com/news/artic...-the-biggest-financial-conspiracy-in-history-
Why anyone trusts or uses LIBOR is beyond me. It is a piece of crap. Why would the US allow some foreigners to set a rate by which so much of this country functions? It is a national security breach. Why don't we hand over nuclear missile launch codes while we are at it. Who the fuck cares that China is hacking US companies compared to this? Seriously? We allow others to set rates on THREE HUNDRED AND FIFTY TRILLION DOLLARS by someone we went to war with? Morons. All opaque markets are rigged. If people haven't learned that lesson in what, 300 years of markets, they deserve what they get.
A very detailed account of T Hayes and a run up to his court appearances was featured in the FT already weeks ago.
If LIBOR's influence is broken as it should be, GBPUSD goes to parity. While I am at it, why is EURUSD 1.13xxx? It should be 1:1, if they are lucky.
Sounds overly paranoid. It's more an issue of why a few individuals were allowed to set such important benchmark. By the way the BBG story is way overblown. It suggests as if the benchmark was falsified to turn whole trading books around. That is incorrect. The benchmark was pushed around a bit around fixings which proved profitable enough. American procecutors frequently blow up stories to make a case for extradition. Same with the HFT case. Now a young individual out of an apartment caused the flash crash.
Goodness...did you sleep over the past year? Just woke up? The euro trades where it trades due to its increasing reserve currency status. For the exact reasons you outlined earlier China and the rest of the world certainly won't want to put all their eggs in one basket
Reserve currency status? Pfffffffft. NO CURRENCY THAT HAS NEGATIVE INTEREST RATES FOR A HUGE PORTION OF THEIR term structure, i.e., the EUR, should be touched with a ten foot pole. And the dollar is heading in the same direction. We already touched zero at three month term: "The dominant and dangerous dollar" http://www.economist.com/blogs/freeexchange/2015/10/weeks-issue
Who is riding you my friend? Not only are you mixing everything up but according to your statement nations should now dump the USD and diversify into other currencies? The term structure of interest rates has nothing whatsoever at all to do with strategic long term decisions which currency to allocate trade surpluses to. And China and other nations have constantly increased their relative allocations into the euro for the past many years. Your point re term structure is totally out of place especially given that you are mostly incorrect: https://www.ecb.europa.eu/stats/money/yc/html/index.en.html
I am saying that certainly not the Euro, and barely the USD can be called reserve currencies. Nowhere did I say people should dump anything. It is a case of picking from bad currencies to horrendous currencies, so you take the least evil choice, which is what the world is doing. But call it what it is, and to call the EUR (and soon the dollar) a reserve currencies is a misnomer. This is not just my opinion. See the Economists article above. To reiterate: Libor or any other market that is opaque is subject to rigging. It is a national security issue for the United States to have $350 trillion dollars be at the mercy of an opaque market. No one doubts that. What I am confounded by is, why even bother with Libor? What is wrong with all the benchmarks interest rates in the US? I am guessing that a HUGE lender to the world are English banks. So we close our eyes and hope for the best. As an aside, the USD and certainly not the EUR are reserve currencies. Certainly not in a traditional sense of the word.