Nine of the world's largest banks will settle a long-running lawsuit accusing them of conspiring to defraud the $465.9 trillion market.
Lawyers representing investors have filed for preliminary approval of a $46 million settlement against JPMorgan Chase, Bank of America, Goldman Sachs, BNP Paribas, Citigroup, Deutsche Bank, Morgan Stanley, NatWest and UBS to end an eight-year antitrust lawsuit. .
Lawyers representing the Chicago Public Schools Teachers' Retirement Fund, the Los Angeles County Employees' Retirement Association and other institutional investors alleged that banks conspired for years to keep the interest rate swap market inefficient and obsolete in order to extract as much profit as possible. in the form of commissions.
Interest rate swaps allow two parties to trade interest-bearing cash flows over a specified period of time.
The plaintiffs argue that the interest rate swap market is clearly ripe for fast and efficient trading on electronic exchanges, but the defendant banks have made every effort to ensure that it exists only in the outdated over-the-counter market they dominate.
“By blocking exchanges from entering the IRS market, the dealer defendants force investors to trade with them in an opaque and inefficient over-the-counter market, which allows the dealer defendants to extract billions of dollars in higher fees and costs year after year from class members in this case.
The dealer defendants supported this profit center by conspiring to crush every potential market entrant that threatened to bring competition and transparency to the buy-side in the IRS marketplace. As detailed in the complaint, the dealer defendants jointly threatened, boycotted, coerced, and otherwise eliminated any organization or practice that would bring stock trading to investors in the IRS marketplace.”
Ironically, the banks themselves used an electronic exchange platform for trading instruments but banned investors and the public from using it, lawyers said.
The Platinum Banks claim that by keeping the IRS market inefficient and under their control, they have made "tremendous profits" over the years.
If approved by U.S. District Judge Paul Oetken, each bank would settle the lawsuit for $46 million, although all banks deny wrongdoing.
In 2022, Credit Suisse, which has since gone bankrupt and became part of UBS, agreed to pay $25 million to settle its part of the case.
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