Big banks must face U.S. swaps price-fixing lawsuit

Thu Sep 4, 2014 4:25pm EDT
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By Jonathan Stempel

NEW YORK (Reuters) - A Manhattan federal judge said on Thursday that investors may pursue a lawsuit accusing 12 major banks of violating antitrust law by fixing prices and restraining competition in the roughly $21 trillion market for credit default swaps.

While dismissing part of the case, U.S. District Judge Denise Cote said investors may press claims that the defendants' Sherman Act violations caused them to pay unfair prices on CDS trades from the autumn of 2008 through the end of 2013, even as improved liquidity should have driven costs down.

"The complaint provides a chronology of behavior that would probably not result from chance, coincidence, independent responses to common stimuli, or mere interdependence," Cote said.

The defendants include Bank of America Corp (BAC.N: Quote), Barclays Plc (BARC.L: Quote), BNP Paribas SA (BNPP.PA: Quote), Citigroup Inc (C.N: Quote), Credit Suisse Group AG CSGN.VX, Deutsche Bank AG (DBKGn.DE: Quote), Goldman Sachs Group Inc (GS.N: Quote), HSBC Holdings Plc (HSBA.L: Quote), JPMorgan Chase & Co (JPM.N: Quote), Morgan Stanley (MS.N: Quote), Royal Bank of Scotland Group Plc (RBS.L: Quote) and UBS AG UBSN.VX.

Other defendants are the International Swaps and Derivatives Association and Markit Ltd MRKT.O, which provides credit derivative pricing services.

Credit default swaps are contracts that let investors buy protection to hedge against the risk that corporate or sovereign debt issuers will not meet their payment obligations.

The lawsuit seeks class-action status, and damages could reach tens of billions of dollars.

"We are gratified with the decision," said Dan Brockett, a partner at Quinn Emanuel Urquhart & Sullivan representing the plaintiffs. "It will be a long, protracted battle."   Continued...

A Bank of America sign is pictured in Encinitas, California January 14, 2014.  REUTERS/Mike Blake