A small trading exchange on Thursday filed an antitrust lawsuit accusing Bank of America, Citigroup, JPMorgan Chase and nine other banks of conspiring to shut it out of the $9.9 trillion credit default swap market.
Tera Group accused the banks of coordinating 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.
It also 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.
“Faced with Dealer Defendants’ unyielding boycott, TeraExchange has been shut out of the CDS market,” Tera said in its complaint filed in Manhattan federal court.
Bank of America, Citigroup and JPMorgan, which the complaint said control 40 percent of the CDS market, declined to comment.
Full Content: Reuters
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