GLOBAL – Danish pension administrator Unipension has filed a class-action lawsuit alleging US clearing members inflated the price of trading derivatives by "unreasonably" restraining competition in the market.
The case, filed last week in the US District Court for the Northern District of Illinois, sees the DKK110bn (€14.7bn) administrator claim that a dozen banks – including Bank of America, the UK's Barclays, UBS and Deutsche Bank – as well as the International Swaps and Derivatives Association (ISDA) and Markit Group – prevented a rival clearinghouse from entering the market and undermined competitive pricing of credit default swap (CDS) trades.
"There is no pro-competitive justification for the defendants jointly to restrict the availability of clearing and broker services, to restrict pricing information or to block new entry," the suit says.
"The effect of these activities has been to decrease competition in CDS trades between defendants and their non-dealer customers, and to increase the 'spreads' between buy and sell orders for such trades, inflating the profits of the defendants and harming consumers of CDS trading."
Unipension, which looks after asset management for the sector-wide funds AP Pension, MP Pension and Pensionskassen for Jordbrugsakademikere & Dyrlæger Samlet – covering Danish vets – said the defendants "conspired and engaged in secret and surreptitious activities to manipulate the CDS market".
The case, which sees the Danish company represented by Korein Tillery, Cohen Milstein Sellers & Toll, the Mehdi Firm, Berger & Montague and Fine and Caplan & Black, also named BNP Paribas, Citibank, Credit Suisse, Goldman Sachs, HSBC, JP Morgan Chase, Morgan Stanley and the Royal Bank of Scotland as defendants.
It asked for damages suffered to be assessed during the jury trial, and a payment worth three times the damages suffered.
It further argued that the court should intervene in the CDS market to "engender competition", mandating that the defendants no longer interfere with independent efforts to establish an exchange, or the transparent trading of CDS.
It also argues the defendants should no longer be able to interfere with inter-dealer broker's attempts to offer its services to third parties.
Markit and Unipension did not respond to requests for comment at the time of publication.
A spokeswoman for ISDA told IPE: "The allegations against us are without merit, and the ISDA acted properly at all times."
The lawsuit follows a similar class-action filing by the Sheet Metal Workers Local No. 33 Cleveland District Pension Plan against the same 14 defendants.
The European Commission in March expanded the scope of an antitrust investigation to cover the ISDA's potential role, alongside several banks, in using Markit to impede the development of CDS platforms.
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