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Lawsuit in U.S. Accuses 12 Big Banks of Credit Default Swap Collusion

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Image by Mark Moz

A small trading exchange on Thursday filed an antitrust lawsuit accusing Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and nine other banks of conspiring to shut it out of the $9.9 trillion credit default swap market, reports Reuters.

The plaintiff, Tera Group, alleges the banks organized a boycott of its seven-year-old TeraExchange platform by refusing both to send it any CDS transactions, and to clear and settle any CDS trades that customers wanted to handle there, according to reporter Jonathan Stempel. The complaint said the banks used their 95 percent market share to require that trading follow a protocol known as “request for quote,” which Tera described as opaque and inefficient.

“Tera said this enabled banks to boost profit by keeping traders in the dark about prices, defeating a goal of the 2010 Dodd-Frank financial reforms, while instilling a “great fear of retaliation” against traders who defected to rival platforms,” Stempel writes.

Read the Reuters article.