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I don't think the Libor manipulation was being done by quants. The false numbers were being submitted by banks' treasury markets desks The pressure to submit the false numbers was coming from the interest rate derivatives desks (or, in the case of Barclays in 2008, the Bank of England). Both desks employ desk quants to babysit derivatives pricing models (and, increasingly, risk models) but aren't run by quants. (Tom Hayes has the classic quant background, but he was working as a flow trader, not a quant).
The US convictions got overturned on appeal, the UK ones did not. The difference is that the UK appeals court ruled that "What rate can your bank borrow at under the standard LIBOR terms?" is a question with (in principle) a single correct answer, and therefore changing your submission based on pressure from another trading desk implies that you were not submitting your best estimate of the true answer, hence per se fraud. The US appeals court said that there is necessary a range of reasonable answers, that choosing one answer within this range as opposed to another based on pressure from another trading desk is not fraudulent, and that the prosecution did not prove that the rigged LIBOR submissions were outside the reasonable range. I am with the Brits on this - everyone involved in LIBOR rigging knew that what they were doing was wrong (both by conventional ethics and by the situational ethics of well-run financial markets). I expect that they also knew that the market for LIBOR-linked interest rate derivatives could not survive their behaviour being exposed (because clients don't want to be ripped off).
All the crooks are now out of jail having served their sentences. Tom Hayes is still trying to clear his name, but there isn't much sympathy for him among London bankers - even if it is technically not a crime, rigging benchmark interest rates is the sort of thing we need to be seen not to do in order to retain the trust of our clients. London as a centre of interest rate derivative trading is weaker because LIBOR has been discontinued.
The people who I do have some sympathy with (and I note that they were not prosecuted) were the people who made optimistic submissions in 2008 in order to contain the financial crisis. You can argue about whether they were cheating according to conventional ethics, but their behaviour made LIBOR (which was used by the industry as a risk-free rate) closer to what everyone expected it to be, helped preserve financial stability in a crisis, and was what the regulators were fairly clear they wanted to see.
I don’t disagree with your analysis. Though flow trader versus quant are fairly adjacent plus as you said he looks like a typical quant. The reason I mentioned libor is it’s a prime example of mixed regulatory messaging and then they ended up in jail.
I remember when Zerohedge use to run articles on things like some stocks were getting so many order messages the system was breaking. That does sound like purposefully manipulating markets to break the system for edge. I would assume there are plenty of things like that of quants pushing the line to gain an edge.
There were, in effect, two separate Libor-rigging scandals. There was no regulatory mixed messaging about the Libor-rigging-for-profit that Tom Hayes et al were engaged in - even if you accept the 2nd Circuit's argument that it wasn't fraud, it was clearly a violation of market norms about treating customers fairly. The regulatory mixed messaging was about Libor-rigging-to-prevent-bank-runs in 2008.
Still think that ties into his quant concerns. No doubt many push the line for edge. So same thing mixed message.
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