Nine of the world’s largest banks are on the verge of resolving a protracted legal dispute alleging collusion to manipulate a market valued at $465.9 trillion.

Legal representatives acting on behalf of investors have sought preliminary approval for a $46 million cash settlement against JPMorgan Chase, Bank of America, Goldman Sachs, BNP Paribas, Citigroup, Deutsche Bank, Morgan Stanley, NatWest, and UBS, bringing an end to an eight-year antitrust lawsuit.

The plaintiffs, including the Public School Teachers’ Pension and Retirement Fund of Chicago and the Los Angeles County Employees Retirement Association, among others, argue that these banks conspired for years to maintain inefficiencies in the interest rate swap (IRS) market. This alleged strategy was designed to maximize fees extracted from participants.

Interest rate swaps involve the exchange of interest cash flows between parties over a specified period. According to the plaintiffs, the IRS market is ripe for efficient electronic trading platforms. However, the defendant banks purportedly ensured its existence solely within an outdated over-the-counter (OTC) framework under their control.

“By blocking exchanges from entering the IRS market, the defendant banks compelled investors to engage in opaque and inefficient OTC transactions,” stated the lawyers. “This enabled the banks to levy billions of dollars in excessive fees and costs annually from the plaintiffs.”

The defendants allegedly preserved this profit model by colluding to thwart any potential competitor that could introduce competition and transparency to the IRS market. The complaint outlines a pattern of joint threats, boycotts, coercion, and other tactics employed against entities attempting to introduce exchange trading options to IRS investors since at least 2007.

Ironically, the banks themselves reportedly utilized an electronic exchange-like platform for trading these instruments while preventing public and investor access to similar tools. This, the plaintiffs argue, allowed the banks to reap substantial profits over the years by maintaining control over an inefficient IRS market.

Pending approval by U.S. District Judge Paul Oetken, each bank will settle the litigation for $46 million, despite all denying any wrongdoing.

In a related development in 2022, Credit Suisse, now part of UBS due to its collapse, agreed to a separate $25 million settlement in connection with the same case.

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