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UK fraud prosecutor charges two brokers in Libor probe

A sign is displayed in an unmarked Serious Fraud Office vehicle parked outside a building, in Mayfair, central London March 9, 2011. REUTERS
A sign is displayed in an unmarked Serious Fraud Office vehicle parked outside a building, in Mayfair, central London March 9, 2011. REUTERS

LONDON (Reuters) - Britain's fraud prosecutor on Monday charged two former brokers at interdealer broker RP Martin with conspiracy to defraud, stepping up its investigation into the rigging of Libor benchmark interest rates.

The Serious Fraud Office (SFO) said it had charged Terry Farr and James Gilmour, seven months after arresting them. They are the first brokers to be charged in the Libor scandal.

The two were arrested a fortnight before Christmas along with former UBS and Citigroup trader Tom Hayes, who was last month charged with eight counts of conspiracy to defraud as the SFO laid the groundwork for what could be the first Libor trial.

A central cog in the world financial system, the London interbank offered rate (Libor) is used as a reference for some $550 trillion in contracts ranging from complex derivatives to everyday credit card bills.

Trust in the benchmark was shaken by revelations last year that traders had routinely manipulated it, prompting a series of investigations by regulators and other authorities.

Britain's Barclays and Royal Bank of Scotland and Switzerland's UBS have been fined by U.S. and UK authorities for manipulating Libor, and more banks and individuals are under investigation.

Inter-dealer brokers were drawn further into the probe when UBS admitted in its settlement in December that its traders paid bribes to brokers in return for their help rigging interest rates. The payments to unnamed brokers ran at 15,000 pounds ($22,700) per quarter.

Farr, 41, and Gilmour, 48, will appear before Westminster Magistrates' Court at a later date, the SFO said.

RP Martin declined to comment.

Brokers are the middlemen who match buyers and sellers for a variety of financial securities, such as bonds, currencies or interest rate swaps. They speak to traders at banks daily, giving them a unique and privileged view of banks' trading.

RP Martin is a UK-based broker with offices in Europe, America, Africa and Asia, but is much smaller than rivals such as ICAP and Tullett Prebon .

The firm traces its history back more than 100 years and is one of the oldest money broking businesses in the world, according to its website. It is known for specializing in trading foreign currencies, and was considered a big player in the Swiss Franc market in the past.

The U.S. owner of the New York Stock Exchange announced last week that it would take over the running of Libor, in a move that Britain's financial regulator said would restore its integrity.

($1 = 0.6615 British pounds)

(Reporting by Steve Slater and Tommy Wilkes; Editing by David Cowell and Mark Potter)

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