FOR IMMEDIATE RELEASE
Ruling advances case alleging world’s largest investment banks conspired
to maintain anti-competitive stranglehold over $275-trillion market.
NEW YORK — In a critical victory for investors and traders across the country, a federal judge ruled today to uphold a majority of claims in a class action lawsuit against many of the world’s largest financial institutions for allegedly conspiring to engineer and maintain a collusive and anti-competitive stranglehold over the market for interest rate swaps (IRS) in violation of federal antitrust laws. In a decision issued by U.S. District Judge Paul Engelmayer, the court ruled that 11 “Dealer Defendant” banks, including Bank of America J.P. Morgan Chase & Co, Citigroup, Goldman Sachs, and Credit Suisse, must face claims brought forth in litigation led by the Chicago Teachers Pension Fund, which seeks an injunction against the banks’ anticompetitive arrangement and compensatory damages.
“We are pleased with the judge’s decision and look forward to vigorously pursuing justice for the Chicago Teachers Pension Fund and other investors harmed by this conspiracy by the world’s biggest banks,” said Michael Eisenkraft, a partner at Cohen Milstein Sellers & Toll, which is co-lead counsel for the plaintiffs in the class action.
“For far too long, the world’s banking giants have shut investors out of electronic trading, and today’s ruling is a critical victory in leveling the playing field,” said Carol Gilden, a partner at Cohen Milstein Sellers & Toll also representing the Chicago Teachers Pension Fund and working on the case. “Interest rate swaps represent a multi-trillion-dollar market that traders across the world depend upon, and we will fight to ensure investors have access to the transparency, competitive pricing, and faster execution denied to them by the Defendant Banks.”
“We stood up to the world’s largest investment banks because a conspiracy of this scale cannot go unchecked. We must be able to trust that the institutions at the heart of our financial system are acting responsibly and transparently,” said Charles A. Burbridge, Executive Director, Chicago Teachers' Pension Fund. “It is encouraging to see that the court acknowledged the importance of this case and the magnitude of the damage caused by the big banks’ actions. We look forward to holding the banks accountable for their egregious behavior."
Interest rate swaps, which are regularly used by a broad spectrum of investors, including pension funds, university endowment funds, hedge funds, and municipalities, allow an entity to swap its fixed interest-rate payments for the floating interest-rate payments of a benchmark, or vice-versa. Given their daily use across the financial industry, interest rates swaps are a critical, multi-trillion dollar market which investors depend upon.
According to the lawsuit filed in November 2015 in the U.S. District Court, Southern District of New York, interest rate swaps have been standardized and ripe for exchange trading for years. Exchange trading brings transparent and competitive pricing and faster execution to a market, thus bringing significant benefits to investors.
As alleged in the complaint, the market for interest rate swaps has been economically ready for standardized exchange trading, but investors remain stuck trading IRS in an inefficient and antiquated market dominated by the Dealer Defendants. The lawsuit alleges that by blocking the entry of exchanges into the IRS market, the banks force investors to trade with them in an opaque and inefficient over-the-counter market, allowing the Dealer Defendants to extract billions of dollars in higher fees and costs. According to the lawsuit, the Dealer Defendants maintained this profit center by conspiring to squash potential market entrants that threatened to bring competition and transparency to the buy-side in the IRS market. As detailed in the complaint, the Dealer Defendants have jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to investors in the IRS market.
The plaintiffs are being represented by Cohen Milstein Sellers & Toll and Quinn Emanuel Urquhart & Sullivan.
About Cohen Milstein
Founded in 1969, Cohen Milstein Sellers & Toll PLLC is a national leader in plaintiff class action lawsuits and litigation. As one of the premier firms in the country handling major complex cases, Cohen Milstein, with 90 attorneys, has offices in Washington, D.C., Chicago, New York City, Philadelphia, Palm Beach Gardens, Fla., and Raleigh, N.C. For more information, visit https://www.cohenmilstein.com or call (212) 838-7797.