Former Rabobank money market trader Paul Thompson will face wire and bank fraud charges in the United States should an extradition order proceed.

The Perth resident was arrested on Thursday by Australian Federal Police officers and is in Hakea Prison, south of Perth city.

Mr Thompson has been indicted by a grand jury in the US over allegations he conspired to manipulate the London Interbank Offered Rate, or Libor; a benchmark used to set the rate on trillions of dollars of bonds, home loans and other interest-rate products around the world.