“If any of the reasons contained in a decision notice to which this section applies relates to a matter which – (a) identifies a person (“the third party”) other than the person to whom the decision notice is given, and 40 (b) in the opinion of the regulator giving the notice, is prejudicial to the third party, 3 a copy of the notice must be given to the third party.”
“A person who alleges that a copy of the notice should have been given to him, but was not, may refer to the Tribunal the alleged failure and – (a) the decision in question, so far as it is based on a 10 reason of the kind mentioned in subsection (4); or (b) any opinion expressed by the regulator giving the notice in relation to him.”
“Deutsche Bank’s misconduct in relation to EURIBOR exemplifies the seriousness of the misconduct and its potential to have a significant impact on the markets. Deutsche 10 Bank used a three pronged approach in an attempt to maximise the impact on EURIBOR. For example, certain Traders would engage in one or more of the following types of conduct: (i) influence Deutsche Bank’s Submitters to alter Deutsche Bank’s EURIBOR submission; (ii) contact other Panel Banks and request that they put in different EURIBOR submissions; and (iii) on occasion offer or bid cash in the market 15 to create the impression of an increased or reduced supply in order to influence other Panel Banks to alter their EURIBOR submissions.”
“The rate at which Euro interbank term deposits are offered by one prime bank to another prime bank within the EMU zone at 11am Brussels time”. 4.11. The definitions were therefore different. LIBOR focused on the contributor bank 10 itself and EURIBOR made reference to a hypothetical prime bank. However each definition required submissions related to funding from the contributing banks. The definitions did not allow for consideration of factors unrelated to borrowing or lending in the interbank market. 4.12. LIBOR and EURIBOR are important to Derivatives Traders and Money Market 15 Traders because they impact on the value of transactions within their trading books. Both benchmark rates affected Traders’ payment obligations pursuant to certain contracts underlying their derivatives transactions. The Traders therefore stood to profit or reduce losses in respect of certain trades as a result of movements in LIBOR and EURIBOR. Traders monitored the exposure of their trading positions on a daily basis. 20 Traders commonly referred to the determination of a floating rate contractual amount referenced to LIBOR or EURIBOR on a particular day as a “fixing”. 4.13. During the Principle 5 Relevant Period it was commonplace that the P&L of Derivatives and Money Market Traders’ books was a factor in the determination of the size of their bonuses and opportunities for advancement. 25 LIBOR and EURIBOR at Deutsche Bank 4.14. In the Principle 5 Relevant Period, Deutsche Bank contributed by way of daily rate submissions for the purpose of the calculation of LIBOR rates in several currencies including USD, JPY, GBP and CHF and also to EURIBOR. 4.15. Deutsche Bank typically assigned responsibility for making LIBOR and 30 EURIBOR rate submissions to certain Money Market Traders who formed the Pool Trading Desk. The CHF and EURIBOR Submitters were based in Frankfurt whilst the USD, JPY and GBP Submitters were based in London. Between at least December 2006 and November 2009, the responsibility for the submission of JPY LIBOR rates was delegated to Derivatives Traders. 35 4.16. At Deutsche Bank, Money Market Traders were responsible for managing the funding needs of the bank and therefore executed intrabank and interbank borrowing and lending transactions. Money Market Traders at times used derivative products referenced to LIBOR and EURIBOR to hedge their cash trades. 4.17. Money Market Traders also traded derivative products referenced to LIBOR and 40 EURIBOR to generate additional profit for Deutsche Bank. These trades were not carried out for the purpose of hedging cash trades or reducing risk exposure on the money market books and were captured in separate proprietary trading books. 6 4.18. Derivatives Traders who formed the MMD Desk executed derivative transactions referenced to LIBOR and EURIBOR to make markets for their clients or as part of a speculative proprietary trading strategy to generate profit for the bank. 4.19. At Deutsche Bank in London, Derivatives Traders and Money Market Traders were part of GFFX. The USD, JPY and GBP LIBOR Derivatives 5 Traders would sit amongst the Money Market Traders who typically acted as Deutsche Bank Submitters. For the majority of the Principle 5 Relevant Period, Money Market Traders (including those who were also Submitters) and Derivatives Traders of the same currency would sit either next to or directly behind each other on the trading floor (with the exception 10 of EUR and CHF for which the Money Market Traders were located in Frankfurt and the Derivative Traders in London). Money Market Traders and Derivatives Traders were actively encouraged by Managers to share information about currencies and markets. Although Traders were subject to Deutsche Bank’s general policies and procedures concerning compliance standards, Managers placed no specific limitations 15 on what the Traders could or should discuss regarding LIBOR and EURIBOR.”
“…COULD I BEG YOU FOR A LOW 3M [EURIBOR] FIXING TODAY PLEASE..THANT WOULD BE THE BEST XMAS PRESENT ;)”
“…BE A PLEASURE, NO PROBS WE HAVE NOTHING ON THE OTHER SIDE HERE. WILL PUT IN 71 [3.71] AT LEAST MAYBE WE CLD [could] 30 PUT IN 70 [3.70]…”
“LOW AS POSSIBLE AS WE HAVE 2.5 YARDS [2.5 billion] ON IT TODAY, SO WOULD BE VERY HELPFULL”
“Are the words used in the "matters" such as would reasonably in the circumstances lead persons acquainted with the claimant/third party, or who operate in his area of the financial services industry, and therefore would have the requisite specialist knowledge of the relevant circumstances, to believe as at the date of promulgation of the Notice 25 that he is a person prejudicially affected by matters stated in the reasons contained in the notice?”
“The objective test, which I have formulated, clearly limits external material to what, 30 objectively, persons acquainted with the claimant/third party, or persons operating in the relevant area of the financial services industry, might reasonably have known as at the date of the promulgation of the relevant notice. That is a workable test. As Mr Herberg submitted, by the time the Authority served the Notice it would have been well aware of the information publicly available to the relevant sector of the market. It 35 follows that I reject Mr Stanley's arguments to the contrary that, only if Mr Macris could have been identified from the "matters" exclusively contained in the Notice, would he have been "identified" for the purposes of section 393. I reject that approach. It is not consistent with the language of the Act or with the ordinary every-day meaning of the word "identifies". It is also unrealistic because, in effect, it pays no regard to 40 knowledge which persons acquainted with the third party, or persons operating in the relevant area of the financial services market, might well have over and above the information which they read in the notice, which necessarily would contribute to their ability to identify the third party. If, as Mr Stanley submitted, the purpose of the third party procedure is to ensure the fair treatment of the reputation of third parties by the 45 Authority, then in my view it is unrealistic to disregard what already is known to the 11 market over and above the information stated in the notice. Mr Stanley's approach would require the court to perform the artificial task of asking the wholly hypothetical question whether, putting on one side the knowledge available to the market, the third party could be identified by what was stated in the notice alone.”
“The Plaintiff alleges that he did not exchange any inadmissible communications contrary to duty with the traders of the Defendant, but rather that the communications presented by the Defendant constituted normal communications between two traders 25 about market expectations, market assessment, interest rate risk and interest rate expectations. The aim was to establish whether the market assessment and the positions were identical with or opposed to each other. The communications with the Defendant’s trader, Mr. Bittar, had not been about the Defendant’s contribution. He had not asked Mr. Bittar about his preferences in relation to the EURIBOR reference rate 30 submission. In addition, the communications, which were in English, had been taken out of context. He was not a native speaker. Also, he claims, there was a so-called traders’ language. According to the Plaintiff, the determination of the EURIBOR reference rate had only represented a very small, negligible part of his activity. 35 He had not been aware that he was not allowed to communicate with traders working at the Defendant in connection with the assessment of the EURIBOR interest rate contributions. It was unclear to him on what prohibition the Defendant based its allegation. He claims that, until July 2012, there had been no rules governing the determination of the EURIBOR interest rates at the Defendant. There had been no 40 controls, records or appropriate manuals with corresponding instructions. For example, the Defendant had not informed him of the relevant market factors that the Defendant considered it was important to take into account when determining the reference rates. Had he not exchanged those communications, he would have overlooked relevant market factors. He further claims that the information about positions (cash and 15 derivatives) also constituted market-relevant information and could thus not be ignored when evaluating and assessing the relevant market factors. Money market derivatives and currency swap markets influenced the pricing on the money market and there was a reciprocal effect on reference rates. According to the Plaintiff, the Defendant had expected that its positions 5 would also be taken into account in connection with the Plaintiff’s submission of the reference rates. Mr Cloete and Mr Nicholls had given instructions to closely exchange, communicate, and coordinate trading positions with the trader Mr. Bittar.”
“The Defendant claims that it had neither tolerated nor promoted the improper communication. In particular, it had not instructed the Plaintiff to coordinate and 20 exchange the trading positions with Mr. Bittar. The EURIBOR guidelines served the purpose of fixing in writing the requirements that had been applicable at the Defendant until then in order to ensure the required market conformity of the EURIBOR submissions.”
“On27 September 2006 , the meanwhile terminated trader Christian Bittar wrote the following to the Plaintiff: 15 “Mein Herr, how are u positioned in 3mth libor over October dates? I’m hoping to get high fixings, is that ur way?”
“We desperately need a HIGH 3mth libor fix – >low october…”
“For example, on October 2, 2006, the Head of the London Money Market Derivatives desk wrote to a submitter, “mein herr, if [supervisor’s] fixings in the 3 mth have rolled 10 off, wud it be possible to put a higher 3 mth fixing?”
“62. Meanwhile on September 27, 2006, Trader-3 also asked that DB’s EURIBOR submitters in Frankfurt would support his position by stating in an electronic chat: Trader-3: Mein Herr how are u positionned in 3 mth libor over october dates? I’m hoping to get high fixings, is that ur way? 25 Submitter-4: DO U WANT A HIGH OCT06 FUT FIX OR A HIGH 3ME FIX? JUST TO CLARIFY Trader-3: we desperately need a HIGH 3mth libor fix – >low october… Submitter-4: MAYBE I AM WRONG BUT ITs NOT EXACTLY MY VIEW FOR A HIGH 3ME FIX.BUT WE WILL CLEARLY SUPPORT U IN UR INT. 30 Later that day, Submitter-4 confirmed, “I got ur point. We will see where the spread comes in [] Will fix high ahead of oct06 xpiry.”