RATE-RIGGING: New toxic Tory links to Iswap – the Libor of derivatives trading

REVEALED: THE SECRETS OF MICHAEL SPENCER’S ISWAP, MICHAEL FALLON, PAGE 19901, AND CONTROVERSY ABOUT DERIVATIVE RATES

Last night at 7.15 pm BST, the Telegraph’s James Kirkup posted a piece on Paul Tucker’s ‘evidence’ headlined ‘Libor scandal may be going on elsewhere’. It must rank as the least assumptive and most understated headline of all time. I can think of a few that could beat it – ‘Some criminals may commit more crimes after release, says new report’ – but not many.

As I posted a couple of days ago, Liboresque scandals are going on everywhere all the time. But this morning I bring you news of senior Tories engaged in a similar sector to Libor – and one which is open to all the crookery, skulduggery, fraud and law-bending of which poor Paul Tucker only became aware just a few short months ago – right under the regulator’s bloody nose.

You will obviously know about Room 101 as featured in 1984. Now learn about Page 19901.

Since 2010, former Tory treasurer Michael Spencer has added another arrow to his quiver-full of greed-seeking missiles: as well as ICAP, he also has Iswap. ISwap is a joint venture between ICAP and four banks – Barclays, Bank of America Merrill Lynch, Deutsche and JP Morgan. In the light of the Libor scandal, you can just imagine how safe the Chinese walls are in this little den of thieves. The idea of criminally implicated banks and a shady broker co-owning and supervising this by now leading trading platform is not designed to inspire the confidence of the populace. But when you read the rule-book, you realise pretty quickly that someone should be reading the Riot Act.

The internet page 19901 is used as a reference when banks settle options on swaps and underwrite corporate bonds….and to decide what rate of interest will be paid to investors holding structured instruments and for valuing asset portfolios. 19901 is also treated as a benchmark in official derivatives documents created by the International Swaps and Derivatives Association, which Sloggers will remember as the organisation unable to spot a default from three inches.

The page was first of all organised by Telerate, a data group, which posted prices using information supplied by Tullett Prebon (director Michael Fallon, current Tory Party treasurer) . When Telerate went bust, Reuters acquired the ashes,  and Icap (owner Michael Spencer, disgraced former Tory Party treasurer) now supplies the ‘data’. And as Icap is working in the sector via Iswap with four very big and ethics-free banks, you can see who is to ‘decide what rate of interest will be paid‘ to investors.

Funnily enough, since Iswap was formed, there has been some heated debate over the figures at 19901. Since around Autumn 2011, controversy has grown around the behaviour of on-screen prices around the crucial 11am point each day – precisely when the page is used as a reference point for settling options on swaps and corporate bonds.  Several hours before and after 11am, prices are usually stable; however, just before 11 they can gyrate – particularly on days when there are heavy sales of corporate bonds or large options trades expiring.

This $40bn Faberge egg of a sector depends on six banks and three broker-dealers controlling the visibility of swap prices…and Iswap is the dominant player. Visibility is the key word, because in the $614 trillion OTC derivatives trade –  i.e., the the interbank sector, where banks deal amongst themselves in massively pointless towers of potentially system-shattering paper derivatives – such OTC business remains resolutely out of the rest of the market’s disbelief-blinking eyes.

You can just imagine the chances of these prices not being bent at will to benefit the charmed circle in and around Iswap. And you can just imagine how easy it is for such dealing to wind up being monetised….thus creating giga-inflation in the real world. So given the Conservative Party has so many friends, supporters, donors and treasurers intimately involved in an activity which may one day blow away the global financial system and create a dire need for new jail construction, I would venture to suggest that these are somewhat radioactive links for it to retain.

For once, I will offer some direct advice to the Tory Right Wing, Graham Brady, the 1922 Committee, old Uncle John Redwood and all: grow some balls and kick Camerlot out, or your Party may well be unelectable forever within two years. And I know that several well-connected Sloggers out there will be happy to pass on the advice.

If they want to do nothing about it anyway, that’s fine too: the vacuum created by a disgraced Tory Party of pariahs would create the perfect vacuum for genuine unaligned reformers and radical realists like me to fill. Anything to keep the Barmy Left at bay.

Has The Slog got anything new against the founder of ISwap? Tune in tomorrow.

86 thoughts on “RATE-RIGGING: New toxic Tory links to Iswap – the Libor of derivatives trading

  1. For once, I will offer some direct advice to the Tory Right Wing, Graham Brady, the 1922 Committee, old Uncle John Redwood and all: grow some balls and kick Camerlot out, or your Party may well be unelectable forever within two years. And I know that several well-connected Sloggers out there will be happy to pass on the advice.

    THIS ONE WILL, ABSOLUTLY AGREE!

    • Cameron was useless in opposition and has worsened since. Surely there must be better people out there than a dismal PR person. ??

  2. Too late, JW.
    The Tories already ARE unelectable. Masses of the rank and file will be voting UKIP at the next election, even knowing UKIP can’t win and that Milliband will become Prime Minister.
    In the country generally the “anything must be better than this lot” feeling grows apace

    • not quite as convinced that it’s a done deal. The marginal seats are relatively affluent, hence the rhetoric being employed is more right leaning.
      these are the seats that matter. Doesn’t matter how many liebor [geddit?] win in the north, it’s always about the marginals.

      • no. i do not ‘geddit’, jonnysinga – i even went to the trouble of looking ‘it’ up in the new grove dictionary…not a semantic sausage.

    • Sorry, but they will vote for Labour directly. UKIP remains utterly irrelevant. Balls will be leader with the much reduced LD’s on his side (where they belong) and he will play on the well-known tendency of electorates to forget the awful recent past and think only of future bread and circuses. He may even apologise for Tony Blair, though not for Brown, that’s too obvious even for him!

      Our rotten politics are a fixed seesaw that generates further hefty state debt and obligations whenever Labour is in power and then fails to achieve any significant improvement when the Tories are back in for a while. And the dimwitted, elitist, politically timid, socially insulated Tories are to blame out there in their gated communities with the investment bankers. I bet they still have duck houses on order for the communal pond.

      It’s just possible if Cameron and Osborne were dumped now, and a good pair of successors promptly found that the Tories could win an election. Oh, and they would need some policies. But I don’t think so, most likely this was their last throw of the dice and they will fade into rich and splendid political isolation, dreaming of swaps and derivatives.

      • duck-harses…suparb idea…and if the little coots wise up and wiot we can summawilly weckwisition said coops far the exclusive use of members’ administwative staff and intwerns.

      • “but I don’t think so, most likely this was their last throw of the dice and they will fade into rich and splendid political isolation, dreaming of swaps and derivatives.”

        promises promises – i remember someone once prophesizing something similar for the socialists…and now we’re within one market-crash of the rotten revolutionaries returning to rule the electoral roost like a ruddy red rash.

      • it’s just possible if cameron and osborne were dumped now…

        they’d better not even dream about signing-on for the soft-life – dock their fringing benefits and make these two no-good nobs work for a living.

  3. Isn’t this several years old? Agreed that the Tories are likely to become un-electable. I’d tell my MP but I doubt that he would listen. He’s Jeremy Hunt.

    • Well opinion polls suggest Tories on 34% – they were at 35% at the last election. So they are about as unelectable now as they were when they came to power. LibDems have collapsed in favour of Labour, who are now on 43%.

      So the next election will put Ed Balls in charge of the economy and he will tell us that “Neo endogenous growth theory supports the idea that massive investment in education will cure all our economic ills”. Then we really will be screwed.

      • neo endogenous growth theory?

        sounds sexy, but ain’t our kids getting enough extra-curricular human biology lessons already (from off the internet)? on the other hand…build a shed-load of new council-houses to house the exploding neo-generation of factory-fit-fledglings wot’ve been made-in-britain, kick the poles out the tent of opportunity, and bob’s yer uncle: self-serficiency in the uk.

  4. Pingback: RATE-RIGGING SCANDAL: as The Slog predicted, detection of the scam is going global. | A diary of deception and distortion

    • Jon
      I genuinely apologise for that – up to a point: (a) the FT itself used several others on its 19901 piece (inc Bloomberg & Rolling Stone) (b) it never credits me and (c) you might as well call Hackgate ‘several years old’.
      Read more carefully, and you’ll see that the crux of the piece is about November 2011 onwards, and rising concerns since Libor: I have yet to see the FT write anything penetrating about either.
      There is a lot of hypocritical crap talked about ‘blog etiquette’…including by the Old Guard: as with everything unregulated, it rapidly becomes a Hobbesian nightmare of bollocks.

  5. Pingback: John Ward – Rate-Rigging : New Toxic Tory Link To ISWAP – The Libor Of Derivatives Trading – Revealed : The Secrets Of Michael Spencer’s ISWAP, Michael Fallon, Page 19901,And Controversy About Derivative Rates – 10 July 2012

  6. Maltese Marcus is being crucified by the TSC,as we speak,as they have also discovered the lack of ‘candour’ of Diamond Bob.We know that the FSA and Old Lady were both incapable of regulating alcohol in a brewery.The choice for the electorate next time round is pretty unattractive,Garry’s ghost party,Dave’s seedy City friends,or Nick’s circus of ex national park regulators and failed old Labour twits.There is a gap in the market here.

  7. Michael Spencer’s interest in Plus Markets needs fisking. If this were football there would be a “fit and proper person” test. Is that the FSA’s responsibility?

    • re: ferdinand -vs- terry

      let me just say, if there were a “fit and proper person test” available in my courtroom it would save the tax-payer a tidy sum – i’d like to clear this case into touch and boot both these half-baked bickering buggers straight into the brixton cooler (or, failing that, back to the junior schoolyard where they truly belong)…but sadly, as it is, i simply can’t face the thought of all the whinging, whining and politically-correct white-noise which will inevitably emanate from sir trevor pipsquawk like some psychotic smoke-alarm.

      • if the defendant is telling the truth and is not racist in character, and if the magistrate believes this claim and his account of events, i would agree that the defendant’s lawyers have chosen the correct fall-back defence in this case (ie. language in itself is inanimate and does not in itself prove anything about the emotional, or psychological, motivation of the person who uses it), but unsurprisingly the proceedings have rapidly descended into an infantile contest where each party is employing the argument “my victimhood is bigger than yours”, and, as such, an insult relating to a physical attribute over which one has no control will always trump, in severity and unfairness, an insult relating to an act which was entered into of the person’s own volition. however, the case will most probably be thrown out due to lack of evidence, thus allowing the magistrate to weedle out of making a philosophically-based judgement – which is a pity, because, had wittgenstein been presiding over the court, he would have undoubtedly come in his pants.

      • regardless of the court’s decision, ferdinand has already won in the sense that he has forced terry to answer the charge of racism in public -and for a celebrity, the public’s no-nonsense decision is final.

      • @let he who is without

        an insult relating to a physical attribute over which one has no control will always trump, in severity and unfairness, an insult relating to an act which was entered into of the person’s own volition

        no it’s just not cricket is it?

      • looks like we need each player miked-up to an intelligence officer throughout the whole game…

        well actually…why stop there?

      • giv bitchards, i presume…

        you were one of my childhood heros, in fact…

        how i remember you effortlessly penetrating the covers and gracefully smashing boundaries…

        delighted to see you have lost neither your touch, style nor timing.

      • right, now hear this, i’ve been very tolerant in the face of continual and relentless abuse of a deeply personal nature – and i categorically deny any suggestion or insinuation that i am, or ever have been, sir giv’s bitch. i admit i did quote anton, but his missus threatened to blow on us both, so we never got to seal the deal.

  8. ” create a dire need for new jail construction”

    No, the latest Barclays scandal show that neither the Fraud Squad, the FSA , the BOE or even the City of London Police, are willing to get involved.

    They all kept well away from the attempted murder of whistle blower Andy Maguire and his wife, so what makes you think the powers that be will worry about a few well connected businessmen just doing their thing?

    • What about the dodgy ‘suicide’ of the BOE official whose body was found ina Chelmsford parking lot in April ‘having repeatedly stabbed himself in the chest and head’? Only an IT guy butwas stressed out working on FSA matters.

    • what about mr david walton, member of the bank of england’s monetary policy committee from july 2005 until his sudden death from necrotising fasciitis in june 2006, who, in his final meeting, was the only member preferring an increase in the interest rate, the other seven members voting to maintain the rate at 4.5%…

      …and walton had also been the only member supporting such an increase in the previous month’s meeting…

      also consider:

      (1) conservative failure to restrict housing-benefit for fear of crashing the buy-to-let market and thus triggering a total housing market crash and electoral disaster and

      (2) cameron’s recent ploy to offer easy-access mortgages as though the sub-prime crime was never committed and

      (3) major changes, in april 6, 2006, to the rules regarding self-invested personal pensions – a government policy which made it possible to invest pension funds in residential and non-commercial property overseas and receive certain tax reliefs.

      there is more than one way to keep the skin of the housing-bubble from bursting…

      …whodunnit?

  9. “…the vacuum created by a disgraced Tory Party of pariahs would create the perfect vacuum for genuine unaligned reformers and radical realists like me to fill. Anything to keep the Barmy Left at bay.”

    As you know, the Barmy Left and the ordinary Left are one and the same thing; they’re interchangeable. There are also some wine/champagne swilling Lefties around. It all depends on which faction is in the ascendancy, who does the window dressing, who’s pulling the strings of the marionette and who’s funding the evil monster. They’re all radical, but never realists. ‘Radical realism’ is simply another name for ‘progressive’ a-la Hattie Hatemen.

    • The Lefties are out in numbers I see today incl’ John – all bashing the Tories as unelectable – short memory chaps, twas LABOUR that bankrupted the country along with the help of the Banksters – what on earth makes you think that Lefty Labour is more electable ? And with Milipede and that evil Balls up of a bloke with Hattie Harman……what a fcuk up .

      • JW knows very well that there is no political party on offer which represents ‘radical realism’. By trying to crucify the Tory Party and blame them for things using very tenuous evidence and no smoking guns, he will simply aid and abet the re-election of the Barmy Labour misfits. One has to assume that’s what he wants to see.

      • Shafto
        Given that for you, anyone to the left of the Mekon is a communist, you are bound to think that. I reject left and right as irrelevant; you use left as an insult. That’s the difference.

      • @JW: From a political ideological point of view, Left & Right are most certainly not irrelevant. They exist today as much as ever. The Right is reflected in a belief in small govt, proper open free markets, regulated to prevent abuse and dishonesty etc. The Left is in favour of corporatism aka fascism. We should not let ourselves be misled by the political elites and political parties who mostly reside on the Left of Centre, irrespective of what party labels they choose to use.
        In Britain we have Red Labour which leans towards totalitarian socialism whenever it gets the chance and we have Blue Labour (aka Conservative Party) which supports something much less severe.

      • bt,

        the left offer zero freedom to do anything good, whereas the right offer total freedom to do evil

        …also, the left can’t add up, whilst the right pretend not to be able to…

        …and the right are only racist to blacker people, whereas the left hate every race equally including their own…

        …finally, both left and right discriminate on the grounds of class…

        it’s all so simple really…

      • dear john,

        you make great play of not being a tory, yet i sense that many who read this blog are not entirely convinced of the true case…

        …so let me settle the matter once and for all by asking you the following questions:

        1) do you currently wear, or have you ever previously worn, a pair of union jack boxers / briefs / panties?

        2) as a course of habit, do you stand, or have you ever stood, to attention on beholding an image or representation of her majesty the queen elizabeth ii?

        3) have you ever done a member of the women’s institute?

        please endeavour to answer these questions as truthfully as possible.

      • Agreed. Which explains my advocacy for many years of having a proper written constitution which would severely limit the powers of the political elites and define their roles & responsibilities when elected in to office.

      • BT,
        Much of our constitution is written already. What we do not have is one document kept in a big box with ‘Ye Constitution’ written there upon. That is a proverbial red herring.

        What we need to do is take an axe to the State and remove it from whole areas of life, but the bleedin heart liberals (who are not liberals at all) wouldn’t like that.

      • @JW: I was only reporting some reality! You’re welcome to provide evidence of any Labour govt in our lifetimes which has not ended in disaster in varying degrees. The last 13 year Labour Party party has wrecked the very foundations of the nation and is by far the worst. The hangover will take a generation to recover from – assuming the right policies are put in place, but there’s few signs of that.
        But that’s what people expect from Labour and they’re usually willing to re-elect them at some time for another booze/drug barmy party in the misguided belief that next time they’ll get it right. They never do. The real damage is done during their times in office as they discreetly roll out their totalitarian model of govt, as we saw under Blair/Brown.

      • @Andy: I agree with much of what you say, except the constitution bit.

        We have no constitution written on behalf the people, voted upon by the people, amendable only by a substantial majority of the people or supervised in any way for compliance. Ergo, we do not have a constitution that’s worth the name IMHO.
        What we have is a set of historical protocols and common law – some written down, others not – which can be changed/repealed by a statute law by whichever political party is in power at the time. This arrangement allows any elected government to assume virtual unfettered power when they take office and leads to massive abuse of power as we’ve seen over the past years.

        It is only by the introduction of a proper written constitution we will achieve what you want: taking an axe to government and getting it out of many areas of life.

      • @BT
        I agree with you re a proper written constitution(this would be the foundation for all other parts of a new system, including small government), I do wonder though, what would be the point if the EU can come along and trump it!

        I think the only chance this country has now is to get out of the EU, it’s going to be painful but that pain is coming anyway, and the longer, nothing but can kicking continues, the higher the level of pain will descend upon us.
        I believe the only thing that will gain a majority agreement between the people of this country now, is a referendum.

      • @Wfd:
        I’d expect a proper written British constitution to be the supreme law of the land which could not be overridden by anybody, including the EU. As we see today, the German constitutional court is debating whether the ESM seeks to override Germany’s constitution. Other countries with constitutions also refer EU laws/regs against their constitutions.

        I agree with you that we need to get out of the EU. It’s now become a complete farce which is destroying everything in sight.

  10. O/T: ‘Will A German Constitutional Court Delay Today Cripple The EUphoria?’ http://www.zerohedge.com/news/will-german-constitutional-court-esm-delay-today-cripple-euphoria
    No, I don’t think so somehow, this from the DT earlier:
    Andrew Roberts, credit chief at RBS, said the whole system was close to falling apart. “The reality is sinking in that there is no big bazooka to solve this crisis. The Germans, Dutch, and Finns were ambushed at the summit and are now saying they didn’t agree to do all these things once they got home,” he said.
    “Nothing has changed. We are no closer to fiscal union, and the banking union is ludicrous. We are getting very close to the end-game but nobody wants their fingerprints on the dagger,” he added.
    What will be interesting though, is how they delay any decision without delaying the ESM itself. What a conundrum…

    • @kfc: An excellent summary of where they’re at methinks. It must be time to have another emergency EU summit to produce some more soothing but confusing press statements. The plughole awaits them…

    • Similar in the FT today. The Germans have said that whilst the ESM will fund Spanish banks directly, the Spanish government will then be liable for the debts that Spanish banks have with the ESM. In other words the Spanish government is just as liable for the Spanish banks as it would be for them if it had bailed them out direct, but now it is all “off balance sheet”. It won’t take long for the markets to price in the “off balance sheet” Spanish debt as if it were on balance sheet, and since they won’t know just how big that debt is going to get because it is now a deal between the ESM and the Spanish banks with the Spanish government picking up the tab once they have been thoroughly stitiched up, I expect they will price on the cautious side.

      I expect the whole thing has been put together to allow French and German interests to extricate themselves from the whole mess, just as they have done over Greece. So much for the European Union.

      • ‘Off Balance Sheet’ = so called private arrangement where no figures are published, therefore no transparency – I hope the Mkts price this into the 10 yr bond / borrowing cost

    • @jonnysingapore: Please don’t quote me on this…but I think diaries are being cleared for EU summits to be held every Friday AND Tuesdays!

      We should see this as a solid determination by TPTB to get to grips with this minor debt problem and deal with it swiftly and effectively.

      Either that or they haven’t got a clue what’s going on….

    • MaxiC.
      If I could find a mutual that deals internationally and
      has a branch in the Isle of Man or the CIs,I would move.
      Unfortunately I need those services and am somewhat
      trapped into a system that I know will steal everything at
      some point..Trying to keep as little as possible in those
      accounts.knowing. that
      The only safe thing now is Gold,held outside the system.
      Banks account balances will be stolen,either by the banks or by
      desperate Govt.’s. as some fast approaching point of time.
      Who is John Galt ?

  11. Well if Bob was less than candid , Tucker is blatantly lying .
    ” Are you aware of any rate fixing going on since 2008 ? ”
    “No” ……………………….. is he serious ? Every quarter end , every year end things are alway pushed and pulled, if not to say every time the market is stressed.
    Sadly, it looks like Goldin Sachs now has he leading candidate to replace Fibbing Merve . Geithner will be pleased .

    • Quite so. Tucker’s stance at the Parliamentary hearing was similar to one Met Police top-dog Andy Harman who showed astonishment and utter indignation at the mere suggestion of him or his buddies being corrupt or incompetent.

      • I would never trust that fat bastard. Tucker by name, tucker by narure. Spent too long in the tucker box. O’neill abeit Goldman sachs would be a breath of fresh air. Not an investment banker or regulator but an economist/ strategist. Broad thinker. Doubt if he will get it though. Carney from the bank of canada might make more sense. They will probably end up with some Buggins turn friend of dave ‘n george.

      • yeah, i think we need someone at the helm who can really get a good firm grip on the rudder, someone who understands all about the price of fish-and-things on the market, inflation, bust, assets and boom-boom – above all, i reckon we want someone who knows how to hustle and make few quid when the going gets tough.

  12. @OAH.’They will probably end up with up with some Buggins turn friend of Dave’n George’.MarK is history,Tucker is compromised,to say the least,and the next Governor is Michael Dobson(born 13 May 1952),Eton ,Oxford and Schroders,a fluent German speaker,and the first non German main board director of Deutschebank.

    • Met him a couple of times when he was with Schroders. He probably like it since he’ll get a Lordship out of it.

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  22. Well hello Mr Angry from a bank. As you are obviously so knowledgeable about such things perhaps you`d care to educate us, rather than being obnoxious and vulgar. Most people here are eager to learn and I`m sure would be more than happy to hear your explanation.
    And whilst you`re at it perhaps you can explain why banks are incapable of surviving a crisis of their making without a rather large helping hand from the dear tax payer – on both sides of the Atlantic – and finally why when we have helped you survive you still have to continue cheating whenever the opportunity arises.

  23. @Mountainman. As someone has posted on another blog, the “Lender of Last Resort” has become the poor old taxpayer. That was never the way it was supposed to be, so it’s not surprising that we may not know the intricacies of the financial world. To be chided on not knowing is, as you’ve pointed out, offensive. Thank you.

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