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Banks Face Swaps-Related Lawsuit

A group of banks and two trading
platforms have been named in a class action lawsuit claiming unfair practices
in the interest rate swaps market.

The class action lawsuit was filed
Wednesday by The Public School Teachers’ Pension and Retirement Fund of Chicago,
and accuses Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup,
Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, the Royal Bank of
Scotland and UBS along with electronic broking platforms Icap and Tradeweb, of
preventing competition according to a report from Reuters.  

According to Reuters, the lawsuit alleges 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 buy side
investors.”

The lawsuit further claims that because
of this the fund overpaid on swaps that it used to hedge its interest-rate
positions.

As of June 2014 the fund had just over $9.5
billion of assets with just over 63,000 retired, vested or active participants.

The case, Public School Teachers’
Pension and Retirement Fund of Chicago v. Bank of America Corp., 1:15-cv-09319,
was filed at the US District Court, Southern District of New York.

In September, a group of 12 banks,
financial services information provider Markit and the International Swaps and
Derivatives Association (ISDA) agreed a preliminary $1.87 billion agreement to
settle allegations that they had conspired to crimp competition in the
credit-default swaps market.

nick@profit-loss.com     Twitter @Profit_and_Loss

 

Colin Lambert

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