Hayes, a former star Citigroup and UBS trader, was convicted in 2015 of conspiracy to defraud by manipulating the London interbank offered rate (Libor), once used to price trillions of financial products globally.

The former yen-derivatives trader, now 44, was sentenced to 14 years in jail, one of the toughest sentences imposed for white collar crime in Britain, reduced on appeal to 11 years.

Hayes, who was released from jail in 2021 on licence, is fighting to clear his name at London's Court of Appeal after a referral by the Criminal Cases Review Commission, which reviews potential miscarriages of justice.

His case is being heard alongside that of Carlo Palombo, a former Barclays trader convicted in 2019 of skewing Libor's euro equivalent Euribor.

They were given the chance to appeal after a U.S. court in 2022 acquitted two former Deutsche Bank traders, ruling there was no prohibition on banks considering their trading position when submitting Libor rates.

The case will be keenly watched by other traders, some of whom attended the hearing on Thursday and have hired lawyers to look into the possibility of bringing their own appeals.

Hayes' lawyer Adrian Darbishire said the judge at Hayes' trial wrongly told the jury there was an "absolute legal prohibition on commercial considerations" when setting Libor rates.

Libor "was set by people who had an interest in its answer, everyone understood that", Darbishire added.

The case hinges on the definition of global benchmark rates such as Libor and whether banks could influence numbers to benefit trading books if rates still reflected an honest assessment of the cost of cost of borrowing between banks.

Hayes maintained during his trial that the levels he requested fell within a permissible range - and that his conduct was common at the time and condoned by bosses.

The Serious Fraud Office (SFO), however, is opposing the appeals, saying Hayes' and Palombo's convictions are safe and that the 2022 U.S. ruling is irrelevant to their cases.

The agency, which prosecuted 19 over benchmark rigging and secured nine convictions, argues Libor rates set for commercial purposes were intended to prejudice the rights of counterparties and deliberately disregarded how the benchmark should be set.

"The fact that an American court came to a different determination ... is irrelevant to the fairness of the appellant's trial and the safety of his conviction," its lawyers said in court filings.

(Reporting by Kirstin Ridley and Sam Tobin, Editing by William Maclean)

By Kirstin Ridley and Sam Tobin