Firm Files Antitrust Suits Against Major Interest Rate Swaps Dealers

The Firm has filed two suits on behalf of electronic swaps exchange facilities (“SEFs”) alleging a conspiracy among major interest rate swaps (“IRS”) dealers to boycott the SEFs in order to undermine increased competition in the IRS market and thereby maintain the dealers’ massive profits. IRS comprise one of the largest financial markets with billions of dollars in notional amounts traded each day. The Firm filed the first action on behalf of TeraExchange, LLC on April 18, 2016, and the second on behalf of Javelin SEF, LLC on May 12, 2016. The defendants in both actions include Bank of America, Barclays, Citigroup, Deutsche Bank, Goldman Sachs, JP Morgan, and Morgan Stanley. On June 8, 2016, U.S. District Judge Paul A. Engelmayer of the Southern District of New York ordered the consolidation for pretrial purposes of the lawsuits along with several related class actions filed on behalf of IRS buy-side customers. In re Interest Rate Swaps Antitrust Litigation, 16-MD-2704 (PAE) (S.D.N.Y.).

As described in the TeraExchange and Javelin complaints, the IRS dealer defendants conspired to boycott both SEFs because the SEFs’ trading platforms allow buy-side customers to enjoy more transparent and competitive IRS pricing. By blocking these platforms, the dealers force buy-side customers to trade in an opaque market in which the dealers hold all the cards. The complaints describe the dealers’ concerted actions to squash TeraExchange and Javelin, including refusing to deal, forcing clearing affiliates to deny clearing services, and threatening customers that used the SEFs’ platforms with loss of business or services. The complaints further allege that the dealers use a variety of mechanisms, including blocking anonymous trading through a practice known as “name give-up," to police their conspiracy and ensure that only the dealers have access to transparent and competitive IRS pricing.

A copy of the TeraExchange complaint is available here, the Javelin complaint here, and Judge Engelmayer’s Order here.