February 7, 2013 / 12:37 PM / 7 years ago

Broker ICAP finds no sign of "wash trades" linked to Libor

LONDON (Reuters) - Brokerage ICAP IAP.L said it had found no signs of telltale “wash trades” used by banks to reward brokers for their help rigging interest rates, in the firm’s latest move to distance itself from the Libor scandal.

ICAP Chief Executive Michael Spencer said on Thursday the British group was conducting an internal probe into possible interest rate-fixing and was sharing relevant information with watchdog the Financial Services Authority (FSA).

“We haven’t found any wash trades that we’ve been involved in,” said Spencer, speaking after ICAP - which acts as an electronic intermediary between the world’s largest investment banks - reported a positive start to the year marked by sharp upturns in foreign exchange and bond trading.

So-called wash trades, where banks make fake trades to pay brokers through commissions, have emerged as one of the main ways in which banks have sought to reward brokers who helped them fix interest rates.

Global regulators said on Wednesday wash trades were frequently used by derivatives traders at Royal Bank of Scotland (RBS.L) - fined $612 million (390 million pounds) for its role in the Libor scandal - to reward brokers for their help in influencing Libor setting by other banks.

ICAP had said on January 24 one of its subsidiaries was the subject of an FSA investigation over rate fixing and Spencer on Thursday confirmed one employee had been suspended and another three put on administrative leave in connection with the probe.

But he said these measures were for actions by individuals and sought to distance the company from them.

More than a dozen banks and brokerages, including JP Morgan (JPM.N), Deutsche Bank (DBKGn.DE) and Citigroup (C.N), are still being probed over the manipulation of rates such as Libor, or London interbank offered rate, which is used to price trillions of dollars of loans.


ICAP does not contribute to the Libor-setting process but regulators have called into question the role that individual brokers, at ICAP and rival firms, may have played as conduits to aid manipulation by traders working at investment banks.

The fine on RBS made it the third global bank to be punished for rate-fixing. Switzerland’s UBS AG UBSN.VX agreed in December to pay penalties of $1.5 billion and Britain’s Barclays (BARC.L) paid regulators $453 million last summer.

Spencer’s comment on wash trades came as ICAP reported foreign exchange trading last month was up 22 percent from January 2012, while bond trading rose 16 percent. The group forecast annual profit in line with expectations.

By contrast, in the three months through December, currency and bond trading had fallen 9 percent to a daily average of $664 billion.

The brokerage said it expected pretax profit for the year through March to be within the range of analyst forecasts of between 280 million pounds ($438.3 million) and 305 million.

“While December was even slower than expected, we’ve seen a marked improvement in trading volumes since the beginning of January across our entire business, although it is premature to tell if this is the start of a more sustained upturn,” said Spencer.

Shares in the company were down 1.2 percent to 352 pence at 1145 GMT, having jumped on Wednesday to their highest level in some seven months.

($1 = 0.6389 British pounds)

Editing by Tom Pfeiffer and David Holmes

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