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Major banks reach $1.86B settlement over fixing credit default swaps

Sep 11, 2015

Twelve major banks have reached a $1.865 billion settlement to resolve investor claims that they conspired to fix prices and restrain competition in the roughly $16 trillion market for credit default swaps, a lawyer for the investors said on Friday.

The settlement in principle was disclosed at a hearing before U.S. District Judge Denise Cote in Manhattan.

Daniel Brockett, the lawyer for the investors, said Cote gave both sides two weeks to iron out details, before submitting a settlement for her preliminary approval.

The defendants include Bank of America Corp, Barclays Plc , BNP Paribas SA, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc, HSBC Holdings Plc, JPMorgan Chase & Co, Morgan Stanley, Royal Bank of Scotland Group Plc and UBS AG.

Other defendants are the International Swaps and Derivatives Association and Markit Ltd, which provides credit derivative pricing services.

"We think it's historic," Brockett said in an interview. "It's one of the largest antitrust class-action settlements, and an extraordinary result for the class."

Credit default swaps are contracts that let investors buy protection to hedge against the risk that corporate or sovereign debt issuers will not meet their payment obligations.

The market peaked at $58 trillion in 2007, according to the Bank for International Settlements, but shrank as investors became more aware of its risks.

The case is In re: Credit Default Swaps Antitrust Litigation, U.S. District Court, Southern District of New York, No. 13-md-02476.

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