ANZ traders joked about rigging headline interest rate
The AustralianMay 18, 2016 12:00am
Leo Shanahan, Ben Butler
ANZ traders joked about their rigging of the headline interest rate and mocked “manipulation within the financial system” and what “good blokes” they were for helping each other set rates.
In new documents released as part of ASIC’s case against ANZ for alleged manipulation of the bank bill swap rate, senior traders thanked each other for setting the rate and joked about the manipulation of the headline rate in instant messaging.
ASIC has also sought to prove ANZ’s capacity to set the BBSW rate, claiming the bank could control more than 90 per cent of the bank bill market on days when it allegedly sought to set the rate.
“Nice rsates et (sic),” Jim Vouziotis, a former senior FX dealer, wrote in a message to Sean Collier at the short-term funding group on November 5, 2010.
“Guess you can thank ANZ,” Mr Collier replied. “llucky (sic) the rate sets are all legit and there is no manipulation within the Australian financial system.”
Mr Vouziotis replied “ahahah” in ironic hysterics.
In another discussion between Mr Collier and trader Mark Budrewicz on December 9, 2011, Mr Collier describes setting the rate as “playtime”. “So are you expecting anyone on the other side trying to keep the rate set low?” he wrote.
“Yes I would say do … so … I have quite a few derivatives against them … hahahahahha,” Mr Budrewicz replied. Mr Collier responds: “ha … its ‘playtime’.”
The corporate regulator has filed a claim against ANZ alleging unconscionable conduct and market manipulation, following a three-year investigation into manipulation of the BBSW.
ASIC said it had identified 44 separate occasions where it alleged ANZ created an artificial price for bank bills. While ANZ was the first Australian bank to face formal accusations of rate rigging, Westpac now also faces a civil claim of alleged manipulation of the BBSW.
ASIC this week released new transcripts from Westpac traders where they discussed fixing the rate, the practice hurting customers and “some inquiry” that would “deservedly” damage the bank’s reputation.
ASIC’s filings show the risks senior executives within the bank were allegedly prepared to take to help set the BBSW rate.
“I have sold short term paper last Friday to help the bank out for rate set purposes and now am in a situation of potential breach,” the head of ANZ’s Australian liquidity portfolio, Matthew Ritter, wrote in a September 9, 2010 email.
In another recorded conversation, Mr Budrewicz reassured Paul Castle, from the bank’s short-term funding group, that a plan to get $715 million worth of extra bank bills for use setting the BBSW would not hurt ANZ’s cash position.
Mr Budrewicz planned to let futures contracts expire and take possession of the underlying bank bills.
“But I’m not going to … take actual delivery, I’m gonna sell them back out into the rate set,” he said in the conversation, recorded at 8.11am on December 9. “So I’m gonna be buying probably about a yard of stock and it’ll be straight in and out tomorrow. So there’ll be no — no cash impact.”
Later that day, Mr Budrewicz explained his plan to an internal bank analyst. “What I have done today is to sell them into the rate set to help push it in my favour,” he said in an email sent at 3.34pm.
In another conversation on December 20, 2011, Mr Castle, Mr Budrewicz and trader Paul Dodd discuss “what good blokes we are” for helping with the rate set, and the ease with which the market could be manipulated around Christmas.
“Does it help you to swap USD (US dollars) on Friday, or do you need/want to push the rate set?” Mr Castle wrote.
“I would like to protect a rate set on Friday,” Mr Budrewicz wrote in reply
“btw, Friday is Xmas eve so there may not be a lot of interest out there,” Mr Castle wrote.
“Agreed ... but I would still like ammo I guess,” Mr Budrewicz responded.
“Even if we replace our maturities the next two days, we can issue extra for you on Friday … that’s the sort of good blokes we are,” Mr Castle joked.
ASIC’s documents also show ANZ enjoyed a dominant position in the bank bill market, selling between 20 per cent and 94 per cent of the 90-day bills issued. It hit 94 per cent on January 21, 2011, when it sold $1.58 billion worth of 90-day bank bills, ASIC told the court
The point is an important one for ASIC because ANZ has claimed the bank could not be guilty of market manipulation if it was working in a competitive system and not colluding with other banks.
ANZ said it rejected the allegations and they would be “vigorously defended” and it believed ASIC’s case was based on a “misunderstanding” of how the BBSW rate was set. “Our practices in the BBSW market were consistent with Australian market practices in wholesale financial markets and we reject ASIC’s characterisation of the transactions in question,” the bank said.
While ANZ and ASIC have previously been close to a settlement, the pair are no longer in mediation.
The BBSW is the primary interest rate benchmark used in Australian financial markets, administered by the Australian Financial Markets Association.
ASIC is seeking declarations that ANZ contravened sections of the Australian Securities & Investments Commission Act and the Corporations Act, which could result in tens of millions of dollars’ worth of fines.