February 11, 2022
Credit Suisse has agreed to pay investors $81 million to be the first bank to exit a putative New York federal court class action accusing banks of colluding to kill competition in the stock loan market, the investors said in a bid for preliminary approval of the so-called icebreaker deal Friday.
As a part of the deal, Credit Suisse AG has agreed to cooperate with the investors as they go after the remaining banks in the suit, including Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC, and JPMorgan Chase Bank NA, the investors said in their bid for approval. The settlement represents between 8% and 17% of Credit Suisse’s proportional share of the damages the investors believed they’ve suffered.
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Stock lending is a temporary transfer of a stock from one investor to another, and it serves as the foundation of short selling. The prime broker defendants are all major players in the stock lending business — their market share has reached as much as 80% in recent years, according to the investors — and serve as middlemen between lenders and borrowers.
The suit was filed in 2017 by a group of public pension funds alleging that these prime brokers circled the wagons when innovation threatened their entrenched positions in the form of electronic platforms offered by startups like Quadriserv and SL-x. The prime brokers agreed to boycott the companies to “starve them of liquidity” and then used EquiLend LLC — a stock loan platform they jointly controlled — to buy up their weakened rivals and shut them down, according to the suit.
The antitrust suit has been in discovery since 2018, when U.S. District Judge Katherine Polk Failla rejected the banks’ attempts to dismiss the allegations. In that ruling, she said the investors have alleged sufficient antitrust standing to pursue their claims.
The investors moved for class certification in February 2020 and asked to appoint Quinn Emanuel and Cohen Milstein as co-lead counsel.
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The investors are represented by Quinn Emanuel Urquhart & Sullivan LLP, Safirstein Metcalf LLP, and Cohen Milstein Sellers & Toll PLLC.