US: Big banks accused of rate swap collusion

A class action lawsuit, filed Wednesday, accuses 10 of Wall Street’s biggest banks and two trading platforms of conspiring to limit competition in the US$320trn market for interest rate swaps.

The class action lawsuit, filed in US District Court in Manhattan, accuses Goldman Sachs, Bank of America Merrill Lynch, JP Morgan Chase, Citigroup, Credit Suisse, Barclays, BNP Paribas, UBS, Deutsche Bank, and the RBS of colluding to prevent the trading of interest rate swaps on electronic exchanges, like those on which stocks are traded.

As a result, the lawsuit alleges, banks have successfully prevented new competition from non banks in the lucrative market for dealing interest rate swaps, the world’s most commonly traded derivative.

The banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case,” the lawsuit alleges.

The suit was brought by The Public School Teachers’ Pension and Retirement Fund of Chicago, which purchased interest rate swaps from multiple banks to help the hedge against interest rate risk. The plaintiffs are represented by the law firm of Quinn, Emanuel, Urquhart, & Sullivan, which has taken the lead in a string of antitrust suits against banks.

As a result of the banks’ collusion, the suit alleges, the Chicago-based fund overpaid for those swaps.

Full content: Fortune

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