RP Martin: The Rate Favors That Paid the Whole Desk

The RP Martin Yen LIBOR brokerage commissions action led to a $1.2 million civil penalty over allegations that brokers helped manipulate the benchmark in exchange for wash-trade commissions. The order put the Yen desk’s revenue from those trades at more than $412,000. The alleged bargain ran through familiar desk business: a client’s request, a broker’s rate message and paired trades that paid the broker while leaving the counterparties with no net change in position.

The Commodity Futures Trading Commission’s May 15, 2014 consent order named RP Martin Holdings Limited and Martin Brokers, its London-based subsidiary. The commission described misconduct from at least September 2008 through at least August 2009, primarily to benefit a senior Yen derivatives trader at UBS Securities Japan and later at another bank. According to the order, the trader wanted rates that suited his positions. RP Martin’s brokers could supply access to the banks submitting those rates, and the trader could supply business that paid the desk.

Why a Broker’s Rate View Mattered

RP Martin’s business put its brokers between banks that needed to trade and banks that needed information. Its voice brokers arranged transactions in bonds, currencies and financial derivatives over the telephone, earning commissions on completed trades. The order describes a relatively small operation, with fewer than 200 employees and five offices worldwide. Its influence depended on whom its brokers could reach.

During the period covered by the order, Yen LIBOR was built from panel banks’ assessments of their unsecured borrowing costs in the London interbank market. Banks submitted rates shortly before 11 a.m. London time, and a trimmed average became the daily fixing. That reference rate mattered to swaps, loans, futures and options. Moving the input could change the rate used by contracts beyond the broker’s own trades.

Brokers supplied market color because they spoke with multiple institutions and could see prices and trading interest that a single bank might miss. As the order explains, that information carried an implied promise of an unbiased assessment based on observable market data. During the financial crisis, limited interbank lending made submitters increasingly reliant on brokers’ information. A forecast dressed as a market view could therefore reach the fixing through somebody else’s submission.

The Commodity Futures Trading Commission brought a separate action against ICAP Europe Limited over broker-distributed false Yen borrowing rates. That parallel matters because the broker occupied an information channel used by the banks setting the benchmark. In RP Martin’s case, the order follows that channel into the commissions offered for helping a favored trader.

How the CFTC Says the Yen Desk Tried to Move LIBOR

The commission described brokers using rate recommendations, direct requests and fictitious cash bids to influence submissions. Each method gave a client’s preferred rate a way into a process meant to reflect borrowing costs.

Rate Suggestions Built Around the Client’s Position

The order says RP Martin brokers sometimes skewed their Suggested LIBORs toward the senior trader’s positions. A bank hearing those suggestions could take them as an assessment of the cash market, even though the starting point was a derivatives trader’s request.

In an October 2008 episode described in the order, the trader asked for lower one-month, three-month and six-month rates. According to the order, a broker then called submitters at several banks and recommended lower rates based on what he claimed to be hearing in the market. The same order reproduces an earlier call in which a Rabobank submitter agreed to lower his one-month rate after an RP Martin broker asked for help. The calls show why the source of a rate recommendation matters: the message could sound like market knowledge while serving a client’s trading book.

Direct Requests for a Favor

On February 25, 2009, the order says a broker contacted submitters directly and through colleagues after the senior trader offered to pay him through a trade for helping lower the three-month fixing. The broker asked other desks to use their own banking relationships, extending the request beyond his personal contacts. One arbitrage desk head’s answer made the internal incentive unusually plain:

The commission found that the effort succeeded: all three banks submitted lower three-month rates, resulting in a lower fixing that day. We see the absurdity in that exchange: the benchmark was supposed to measure borrowing costs, and the broker’s colleague was bargaining over credit for the trade.

The Cash Bids the CFTC Called Fictitious

The order also describes a broker broadcasting fictitious cash bids through the desk’s squawk box, which let him speak to several bank traders. The intended audience included LIBOR submitters who might treat the announced price as evidence of where banks would trade Yen cash. According to the commission, the senior trader encouraged those messages because they could influence submissions in his favor.

The 2024 working paper An Analysis of Market Manipulation Definitions Around the World, part of a World Federation of Exchanges research project, reviews an existing classification of manipulation through false information, benchmark submissions and orders intended to send misleading signals. Here, the alleged false signal was a cash bid spoken into a broker’s communications system. The bank’s submission carried the hoped-for effect into the benchmark, while a separate trade supplied the broker’s compensation.

How the CFTC Says Wash Trades Paid the Whole Desk

According to the order, the commission revenue came from at least nine wash trades. The counterparties took opposing sides of identical trades, leaving each with a net-zero trading position from the pair. The order says RP Martin brokered both sides and earned the commissions. Busy tickets, unchanged exposure, money for the broker.

The commission said those commissions were shared across the entire Yen desk, giving other brokers a reason to help find counterparties and contact additional submitters. According to the order, the wash-trade business made UBS the desk’s second-largest client and accounted for nearly 9% of desk revenue during 2008 and 2009. The financial incentive reached beyond the broker who received the original request.

The order describes brokers recruiting counterparties by promising meals, travel and entertainment. Those favors supplied the other side of the paired transactions that would generate the fees. It also describes efforts to hide the arrangement by avoiding written confirmation, using telephone calls and staggering execution so the matching trades would attract fewer questions.

A commission report alone would show revenue. The same report read alongside the paired trades and requests for rate help could show what that revenue was paying for. That connection is the heart of the RP Martin allegations, and it is one a person inside brokerage operations could recognize.

The CFTC on Unusual Commissions and Management Inaction

The Commodity Futures Trading Commission said a manager monitoring back-office brokerage activity noticed the unusually large commissions and questioned the Yen desk. The order records a broker’s response:

According to the order, the manager discussed the wash trades with a member of senior management, but nobody investigated why the banks were generating those commissions. On the commission’s account, someone had already spotted the unusual business. The failure it described came after the question reached management.

The order says RP Martin had no procedures to approve or verify the market information brokers distributed. It also describes inadequate reviews of brokers’ client communications, leaving the rate requests without the scrutiny that could connect them to the commission business.

What Evidence Is Required to Prove Fraud?

In the RP Martin order, the evidence connected the client’s request, the broker’s message, the bank’s submission and the trade that paid the broker. The order makes those connections through calls, chats, trading activity and shared commissions. We work with an insider to understand how the records fit the business, including who could change the message and who benefited from the resulting trade.

A broker may know why a rate suggestion changed. Someone in operations may recognize the paired trades, their execution times or the commission allocations. A manager or compliance employee may know what happened after unusual revenue drew attention. Each view can explain part of an arrangement that looks different when the messages and transactions are read separately.

The order required RP Martin to document who produced its market information and the data behind it. It also required recording and reviewing communications, tying the rate views back to the people who supplied them.

A Whistleblower’s Knowledge of the Desk

If you recognize comparable conduct, our starting point is what the desk said, what it traded and who directed the two. We help you assess a CFTC fraud report and bring in CFTC whistleblower lawyers who understand benchmark manipulation and brokerage records. We work through whistleblower eligibility with you.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. The separate CFTC whistleblower program offers eligible whistleblowers a combined 10% to 30% share of the money collected in a qualifying action. RP Martin’s action was a CFTC proceeding, and we assess the program that fits the conduct you know.

You Know What the Trades Were Paying For

If you saw rate messages shaped around a client’s wishes or trades arranged to reward that help, talk to our whistleblower experts about what happened on your desk. We connect your knowledge of the business with the records that explain the arrangement and the CFTC whistleblower lawyers equipped to pursue it. We stay beside you as partners from that first conversation through the case.