Pension funds allege that a cartel of big banks made it artificially expensive to hedge against interest-rate risk.
Wall Street’s biggest and best are facing new accusations of market-rigging in a multi-billion class action suit from investors in the $320 trillion market for interest rate swaps.
The suit, filed Wednesday, accuses 10 of Wall Street’s biggest banks and two trading platforms of conspiring to limit 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 alleged.
Filed in the U.S. District Court in Manhattan, the suit accuses Goldman Sachs Group GS 0.25% , Bank of America Merrill Lynch BAC -0.17% , JPMorgan Chase JPM0.12% , Citigroup Inc. C -0.18% , Credit Suisse Group CS 2.55% , Barclays Plc BCS0.45% , BNP Paribas SA BNPQY -0.44% , UBS UBS 0.16% , Deutsche Bank AG DB0.24% and the Royal Bank of Scotland Plc RBS of colluding to prevent the trading of interest rate swaps on electronic exchanges, similar to those on which stocks are traded.
Goldman Sachs, Citigroup, Bank of America, BNP Paribas, Credit Suisse and Royal Bank of Scotland declined to comment. JP Morgan, Barclays, Deutsche Bank and UBS were not immediately available.
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 fund hedge against interest rate risk on debt. The plaintiffs are represented by the law firm of Quinn, Emanuel, Urquhart, & Sullivan LLP, 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 teachers’ pension and retirement fund overpaid for those swaps.
The suit alleged that since at least 2007 the banks “have jointly threatened, boycotted, coerced, and otherwise eliminated any entity or practice that had the potential to bring exchange trading to buyside investors.”