The latest scandal is reported in Rollingstone, the ISDAfix. A market worth $379 trillion and the London-based firm ICAP, is being investigated for fixing the rates.
As quoted :
‘A small group of brokers at ICAP may have worked with up to 15 of the world’s largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.
Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive.’
Courtesy of wiki:
An interest rate swap (IRS) is a popular and highly liquid financial derivative instrument in which two parties agree to exchange interest rate cash flows, based on a specified notional amount from a fixed rate to a floating rate (or vice versa) or from one floating rate to another. Interest rate swaps are commonly used for both hedging and speculating.
A lovely titbit from the article:
“In all the over-the-counter markets, you don’t really have pricing except by a bunch of guys getting together,” Masters notes glumly.
That includes the markets for gold (where prices are set by five banks in a Libor-ish teleconferencing process that, ironically, was created in part by N M Rothschild & Sons) and silver (whose price is set by just three banks), as well as benchmark rates in numerous other commodities – jet fuel, diesel, electric power, coal, you name it. The problem in each of these markets is the same: We all have to rely upon the honesty of companies like Barclays (already caught and fined $453 million for rigging Libor) or JPMorgan Chase (paid a $228 million settlement for rigging municipal-bond auctions) or UBS (fined a collective $1.66 billion for both muni-bond rigging and Libor manipulation) to faithfully report the real prices of things like interest rates, swaps, currencies and commodities.”
Banks and the banksters prove time and time again that they are not to be trusted, glad Mr Cameron has got their backs.