Details of the settlement involving a dozen big banks accused of conspiring to rig prices and restrict competition in the credit default swaps market have been released. According to papers filed in federal court in Manhattan last week, the following firms will collectively pay nearly $1.9 billion:
· JPMorgan Chase & Co. (JPM): $595M
· Morgan Stanley (MS): $230M
· Barclays Plc (BARC): $178M
· Goldman Sachs (GS): $164M
· Credit Suisse (CS): $159M
· Bank of America Corp. (BAC): $90M
· Deutsche Bank (DB): $120M
· BNP Paribas (BNP): $89M
· Citigroup (C): $60M
· Royal Bank of Scotland (RBS): $33M
· HSBC Holdings Plc (HSBC): $25M
The defendants are accused of trading in a way that let them make a profit while customers sustained losses.
Credit default swaps (“CDS”) are contracts that allow investors to purchase protection so they can hedge against the risk that corporate or sovereign debt issuers may not satisfy their payment duties. The plaintiffs contend that from late ’08 through the end of ’13, the defendants’ purported actions compelled investors to pay unfair prices on CDS trades even though enhanced liquidity should have caused the prices to drop.
The plaintiffs also claim that the banks attempted to get in the way of the launch of CME Group’s Inc.’s credit derivatives exchange by deciding together that they would not use new CDS platforms while pressing Markit Ltd., which provides credit derivative pricing services, and the International Swaps and Derivatives Association to not give licenses to the new exchange.
The investor plaintiffs include a number of institutional investors, including the:
· Illinois Cleveland District Pension Plan
· Los Angeles County Retirement Association
· Fund Liquidation Holdings LLC
· Essex Regional Retirement System
· Sheet Metal Workers Local No. 33
· MF Global Capital LLC
· Delta Pleiades, LP
· State Universities Retirement System of Value Recovery Fund LLC
Another defendant is UBS AG (UBS). ISDA is also settling, and will pay $750K, while Markit will pay $45M.
JPMorgan, Morgan Stanley pay most in $1.9 billion swaps price-fixing settlement, Reuters, October 16, 2015