Lawsuit claims 10 big banks rigged market for ‘odd-lot’ U.S. corporate bonds By Reuters

© Reuters. FILE PHOTO: FILE PHOTO: File photo of people walking by the JP Morgan & Chase Co. building in New York


By Jonathan Stempel

NEW YORK (Reuters) – Ten of the world’s largest banks, including JPMorgan Chase (N:) and Bank of America (N:), have been sued for allegedly conspiring over nearly 14 years to rig prices in the $9.6 trillion U.S. corporate bond market, costing ordinary investors billions of dollars.

The proposed class action filed on Tuesday in federal court in Manhattan said the banks have since August 2006 violated antitrust law by overcharging investors on “odd-lot” trades, which are worth less than $1 million and comprise 90% of all corporate bond trading.

Other defendants include Barclays (L:), Citigroup (N:), Credit Suisse (S:), Deutsche Bank (DE:), Goldman Sachs (N:), Morgan Stanley (N:), Royal Bank of Scotland (L:) and Wells Fargo & Co (N:), or their respective affiliates.

According to the 81-page complaint, the banks leveraged their power from handling more than two-thirds of U.S. corporate bond underwriting to quietly inflate spreads between the prices where they would buy and sell odd-lot bonds.

This allegedly resulted in spreads 25% to 300% higher than on “round-lot” trades over $1 million, which are normally conducted by institutional investors, enabling the banks to reap higher compensation while boosting retail investors’ trading costs.

“No reasonable economic justification explains the magnitude of the pricing disparity,” the complaint said. It added that odd-lot spreads are narrower even in foreign bond markets with lower volumes and liquidity.

Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs and Wells Fargo declined to comment. Representatives of the other banks did not immediately respond to requests for comment.

The investors are led by Isabel Litovich, a San Juan, Puerto Rico, resident who said the collusion resulted in overcharges on odd-lot bond trades through her Morgan Stanley account.

Lawyers for the plaintiff did not immediately respond to requests for comment.

The Manhattan court has been home to dozens of private lawsuits accusing banks of conspiring to move various bond, commodity and currency markets. Earlier settlements in some of those cases have resulted in billions of dollars in recoveries.

The case is Litovich v Bank of America Corp et al, U.S. District Court, Southern (NYSE:) District of New York, No. 20-03154.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Be the first to comment

Leave a Reply

Your email address will not be published.