A former Rabobank money market trader has been arrested in Perth over allegations he was involved in a global banking fraud.

Paul Thompson, 49, from the upmarket riverside suburb of Dalkeith, was arrested last week and spent the weekend in Hakea Prison.

The US Department of Justice is seeking to extradite him for wire fraud and bank fraud offences.

He is one of seven Rabobank traders indicted in New York and the first Australian to be arrested and charged for allegedly manipulating the Libor lending rates.

It is alleged he committed the offences while working for Rabobank in Singapore between 2006 and 2011.

The traders are alleged to have collaborated to set the Libor at a rate that would help them make money on their trading positions.

The Libor is the average interbank interest rate at which a selection of banks on the London money market are prepared to lend to one another.

Banks are supposed to set the rate independently, without colluding.

A magistrate will now determine whether Thompson is eligible for extradition.

An Attorney-General's Department spokesperson confirmed his arrest but said no further comment would be made as the matter was now before the courts.