Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Labor, health funds claim banks manipulated U.S. treasuries market, (Dec 17, 2015)

By Greg Hammond, J.D.

Adding to the dozens of suits filed against more than 20 banks for allegedly manipulating Treasury securities auctions and the market for derivative financial products in violation of the Sherman Act and Commodity Exchange Act, Twin City Iron Workers Pension Fund and Twin City Iron Workers Health & Welfare Fund have filed their own complaint in the federal district court in New York City (Twin City Iron Workers Pension Fund v. Bank of Nova Scotia, December 16, 2015).

Twin City alleges that the defendant banks are primary dealers in the market for U.S. Treasuries, debt instruments issued by the U.S. Treasury Department to help finance the operations of the U.S. government. The banks act as sellers of U.S. Treasuries to their customers during the when-issued market—the period between an auction announcement date and the issuance of the auctioned securities—but later become buyers of U.S. Treasuries in order to cover the sales they made during the when-issued market. The difference in the price at which the banks sell in the when-issued market and purchase at auction is the banks’ profit. The goal of the alleged conspiracy, according to the complaint, was to produce supracompetitive profits.

To execute the alleged conspiracy, the banks purportedly used a two-pronged scheme, in which they: (1) used electronic chatrooms, instant messaging, and other electronic and telephonic methods to exchange confidential customer information, coordinate trading strategies, and increase the bid-ask spread in the when-issued market to inflate prices of U.S. Treasuries they sold; and (2) used the same means to rig the U.S. Treasury auction bidding process to deflate prices, at which they bought U.S. Treasuries to cover their pre-auction sales.

The six-count complaint alleges that the defendants entered into an illegal agreement to reduce competition amongst themselves by fixing and/or manipulating Treasury security prices before and during Treasury auctions and, as a result, the prices of Treasury Securities, Treasury futures, and options on Treasury futures traded on the Chicago Mercantile Exchange, in violation of the Sherman Act. In addition, the plaintiffs claim numerous violations of the Commodity Exchange Act, as well as unjust enrichment.

Twin City Iron Workers seek to represent a class of all persons or entities during the period from January 1, 2007, to the present who transacted in any Treasury Instrument. In addition, the complaint requests permanent injunctive relief prohibiting the defendants from continuing and maintaining the alleged conspiracy; damages and trebled damages; as well as costs of suit, attorney fees, and expenses.

The case is No. 1:15-cv-09803.

Attorneys: Brian Murray (Glancy Prongay & Murray LLP), Heidi M. Silton (Lockridge Grindal Nauen P.L.L.P., Garrett D. Blanchfield (Reinhardt Wendorf & Blanchfield), and Christian M. Sande (Christian Sande LLC) for Twin City Iron Workers Pension Fund and Twin City Iron Workers Health & Welfare Fund.

Companies: Twin City Iron Workers Pension Fund; Twin City Iron Workers Health & Welfare Fund; Bank of Nova Scotia, New York Agency; BMO Capital Markets Corp.; BNP Paribas Securities Corp.; Barclays Capital Inc.; Cantor Fitzgerald & Co.; CIBC World markets Corp.; CitiGroup Global Markets Inc.; Commerz Markets LLC; Countrywide Securities Corp.; Credit Suisse Securities USA LLC; Daiwa Capital Markets America Inc.; Deutsche Bank Securities Inc.; Goldman, Sachs & Co.; HSBC Securities USA Inc.; Jefferies LLC; J.P. Morgan Securities LLC; Merrill Lynch, Pierce, Fenner & Smith Inc.; Mizuho Securities USA Inc.; Morgan Stanley & Co. LLC; Nomura Securities International, Inc.; RBC Capital Markets, LLC; RBS Securities Inc.; SG Americas Securities, LLC; TD Securities USA LLC; UBS Securities LLC

News: Antitrust NewYorkNews