Goldman Sachs and JPMorgan Chase will face narrower claims in a lawsuit accusing them and 10 other banks of conspiring to limit competition in the credit-default swaps market.
U.S. District Judge Denise Cote in Manhattan today dismissed a claim in the consolidated case that the banks colluded to monopolize trading in the financial instruments, which are used to hedge credit risk. The banks must still face claims they worked together to limit competition in the CDS market.
Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. The value of the contracts, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declines as investor confidence improves and rises as it deteriorates.
The banks are accused of conspiring to control the market for information about credit-default swaps and their trading, in violation of U.S. antitrust laws. The banks allegedly sabotaged a CDS exchange planned by the Chicago-based CME Group, leaving market participants with no efficient way to find other non-dealers that wanted to trade the same CDS, according to complaints filed last year.
The claims were filed by a group of investors, including public pension funds, that traded credit-default swaps with the banks from 2008 to 2013.
Tiffany Galvin, a spokeswoman for New York-based Goldman Sachs, and Brian Marchiony, a spokesman for New York-based JPMorgan Chase, declined to comment on the ruling.
In addition to Goldman Sachs and JPMorgan Chase, the investors sued Citigroup Inc., Bank of America, Barclays, Deutsche Bank, BNP Paribas, HSBC, Royal Bank of Scotland, Credit Suisse, Morgan Stanley and UBS.
Also named as defendants are the International Swaps and Derivatives Association, a trade group representing participants in the over-the-counter derivatives market; and London-based Markit Group, a financial-information company.
In addition to dismissing the conspiracy to monopolize claim, Cote today said the banks' alleged anticompetitive conduct started no earlier than fall 2008.
The case is In Re Credit Default Swaps Antitrust Litigation, 13-md-02476, U.S. District Court, Southern District of New York (Manhattan).