The Chicago Teachers’ Pension Fund’s ongoing antitrust litigation
involving the world’s largest banks cleared a major hurdle on
July 28, 2017, when Judge Paul Engelmayer of the U.S. District
Court for the Southern District of New York ruled that the suit
could proceed. The Fund’s lawsuit, filed in November 2015,
alleges that the world’s largest investment banks conspired to
engineer and maintain a collusive and anti-competitive
stranglehold over the market for interest rate swaps (IRS), in
violation of federal antitrust laws. Such alleged actions harm
investors in one of the world’s largest financial markets. CTPF
is represented by Cohen Milstein Sellers & Toll and Quinn
Emanuel Urquhart & Sullivan, LLP.
“We are pleased to see that the court has recognized the
legitimacy and importance of this action,” said Jay C. Rehak,
President of the CTPF Board of Trustees. “We have taken this
stand against the world’s largest investment banks because a
conspiracy of this scale cannot go unchecked. As consumers of
financial products, we must trust that the institutions at the
heart of our financial system act responsibly and transparently.
We look forward to holding the banks accountable for their
egregious behavior.”
The “Dealer Defendant” banks named in the complaint include Bank
of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank,
Goldman Sachs, JPMorgan, the Royal Bank of Scotland, and UBS.
Interest rate swaps, regularly used by a broad spectrum of
investors, allow an entity to trade its fixed interest rate
payments for the floating interest rate payments of a benchmark
or vice versa. When used appropriately, swaps provide investors
with flexibility in managing debt and mitigating risk. This
vehicle is used extensively in the financial marketplace, with
more than $1.4 trillion in swaps changing hands daily.
According to the complaint, interest rate swaps have been
standardized and ripe for exchange trading for years. Open
exchange trading brings transparent and competitive pricing and
faster execution to a market, resulting in significant financial
and administrative benefits to investors. Exchange trading
dominates the financial marketplace, and products ranging from
equities to foreign currencies trade on electronic exchanges. The
complaint alleges that the banks used their power to stop
competitors from bringing exchange trading to the IRS market -
artificially inflating the time for and costs of the trade
process. As a result, CTPF paid more for swaps than it would have
in a competitive market.
The suit seeks an injunction to put an end to this
anti-competitive arrangement, and damages for the injuries
suffered.
CTPF will continue to update members on the status of this
litigation as it progresses.