New York, NY – A class action lawsuit, filed last week, accuses two trading platforms and ten of Wall Street’s largest megabanks of conspiring to stifle competition in the $320 trillion dollar derivatives market for interest rate swaps.
The lawsuit claims the banks “have been able to extract billions of dollars in monopoly rents, year after year, from the class members in this case.”
According to a report by Reuters:
The class action lawsuit, filed in U.S. District Court in Manhattan, accuses Goldman Sachs Group (GS.N), Bank of America Merrill Lynch (BAC.N), JPMorgan Chase(JPM.N), Citigroup(C.N), Credit Suisse Group (CSGN.VX), Barclays Plc (BARC.L), BNP Paribas SA (BNPP.PA), UBS (UBSG.VX), Deutsche Bank AG (DBKGn.DE), and the Royal Bank of Scotland (RBS.L) of colluding to prevent the trading of interest rate swaps on electronic exchanges, like the ones on which stocks are traded.
As a result, the lawsuit alleges, banks have successfully prevented new competition from non-banks in the lucrative market for dealing interest rate swaps, the world’s most commonly traded derivative.
The Public School Teachers’ Pension and Retirement Fund of Chicago brought the suit against the elite global financial powerhouses, after purchasing interest rate swaps from numerous banks as a means of assisting the fund in hedging against interest rate risk on debt. Those purchases led to the Chicago Teachers’ Pension and Retirement Fund vastly overpaying for those swaps, according to the suit.
The suit alleged that 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,” since at least 2007.
“Defendants did this for one simple reason: to preserve an extraordinary profit center,” the lawsuit said.
The lawsuit goes on to claim that the banks masked their collusion by using code-names for joint projects such as “Lily, Fusion, and Valkyrie.”
Out of the ten banks named in the lawsuit, nine of the banks own equity stakes in Tradeweb and hold positions on the company’s board and governance committees. The banking consortium used those positions to effectively control Tradeweb and collectively blocked the development of more investor-friendly swaps exchanges by firms such as the CME Group, TrueEX, Javelin Capital Markets, and TeraExchange, according to the suit.
According to the lawsuit:
“During the time period relevant here, Tradeweb board and governance committees… were organized specifically for the purpose of protecting the ‘dealer community’ from the growth of exchange trading.”
Similar allegations of bank collusion in the market for another type of derivative, known as credit default swaps, have been the subject of investigations by the United States Department of Justice and the European Commission, as well as a separate class-action lawsuit brought by investors, according to Reuters.
In September, twelve banks and two industry groups settled that lawsuit by agreeing to pay $1.87 billion, making it one of the largest antitrust class action lawsuits in U.S. history, according to the Wall Street Journal.
The scale of alleged theft is almost unimaginable. If you want to understand who/what controls governments, you have found the industry that stands above all others in its ability to bend the will of states and from which all other industries bow at the alter of; the true ‘Masters of the Universe.’
Jay Syrmopoulos is an investigative journalist, free thinker, researcher, and ardent opponent of authoritarianism. He is currently a graduate student at University of Denver pursuing a masters in Global Affairs. Jay’s work has been published on Ben Swann’s Truth in Media, Truth-Out, AlterNet, InfoWars, MintPress News, as well as many other sites. You can follow him on Twitter @sirmetropolis, on Facebook at Sir Metropolis and now on tsu.