This week the renowned law firm of Quinn Emmanuel filed a fascinating new piece of litigation on behalf of the Chicago Teachers penion fund. They allege that the largest IRS dealers, plus ICAP and Tradeweb, colluded to reduce competition in IRS markets - in part by blocking the development of SEFs, new electronic swaps venues developed by Dodd Frank.
The mere filing of this lawsuit may have significant ramifications for swaps market structure and Dodd Frank enforcement by the CFTC. We intend to follow this lawsuit closely!
The class action lawsuit...accuses Goldman Sachs Group, Bank of America Merrill Lynch, JPMorgan Chase, Citigroup, Credit Suisse Group, Barclays Plc, BNP Paribas SA, UBS, Deutsche Bank AG, and the Royal Bank of Scotland 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 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. As a result of the banks’ collusion, the suit alleges, the Chicago teachers’ pension and retirement fund overpaid for those swaps.