Case Spotlight: Interest Rate Swaps Antitrust Litigation
Want to discuss your filing options for Interest Rate Swaps or access FRT’s proprietary querying memo?
The United States District Court for the Southern District of New York has preliminarily approved two settlements that will resolve In re Interest Rate Swaps Antitrust Litigation.
The case, which centers around Interest Rate Swap (IRS) contracts, involves multiple defendants and a class period spanning more than a decade. Read on for a brief overview of the recovery opportunity and considerations for affected investors.
Background
- Claim deadline: June 16, 2025
- Class period: January 1, 2008 through June 10, 2024
- Settlement fund: $71 million
- Settling defendants: Credit Suisse, Bank of America, Barclays, BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, NatWest, UBS
Plaintiffs claim that several intermediary banks conspired over many years to prevent investors from trading IRS products – either directly or via all-to-all anonymous electronic trading platforms. By impeding the introduction of more transparent and competitive trading options, dealer banks profited at the expense of investors by keeping themselves in the middle of every IRS transaction, according to the plaintiffs.
IRS derivatives allow financial institutions to exchange their interest payments over time, enabling each side to manage its market rate exposure, reduce borrowing costs, and/or achieve more favorable cashflow. Often, one party pays a fixed rate while the other pays a floating rate, the latter of which is generally tied to benchmarks such as LIBOR or SOFR.
Recovery Considerations for Eligible Investors
The Interest Rate Swaps settlement encompasses several types of IRS transactions, including fixed-for-floating, floating-for-fixed, or floating-for-floating rate swaps, as well as forward rate agreements, single-currency basis swaps, and overnight index swaps.
Eligible investors must have entered one of these IRS transaction types with any of the settling defendant banks during the class period (Jan. 1, 2008 – Jun. 10, 2024). They must also demonstrate a legal nexus (connection) with the U.S., meaning either the investor was domiciled there, or the activity occurred there.
The two settlements that received preliminary approval from the court arise from the same underlying misconduct, but they feature different defendants and class end dates. The first involves Credit Suisse and related business entities, while the second involves all other named settling defendants. Firms that wish to participate in both settlements should begin gathering data using the class period above, which encompasses the eligible periods for both settlement classes.
How Interest Rate Swaps Affects the Antitrust Landscape
Securities-related antitrust class actions tend to come in waves, with lawsuits going after similar methods for market manipulation tied to various financial instruments. In recent years, for instance, we have seen a spate of cases around similar improper practices used to impact benchmark rates (e.g., LIBOR, FX) and commodities markets (e.g., spoofing in gold, silver, precious metals).
Interest Rate Swaps is notable for its similarities to the $580 million stock lending litigation and signals the potential for a new wave of antitrust class actions.
In stock lending, intermediaries allegedly prevented the use of technology that would have enabled direct trading between buyers and sellers, thereby suppressing competition and keeping dealer banks in place as unchallenged middlemen. Interest Rate Swaps alleges similar anticompetitive behavior, namely the squashing of technical innovation that threatened to disintermediate the dealer banks and their positions in the IRS market.
Unlike stock lending, however, the Interest Rate Swaps settlement features a more straightforward recognized loss formula, giving claimants greater visibility and predictability around potential recoveries.
Next Steps
Due to the complexity of the impacted financial instruments, antitrust cases involve more challenging data collection, eligibility criteria, and filing requirements than securities class actions. Compared to securities class actions, however, antitrust settlements may offer significantly greater recovery dollars and pro rata payout rates. In 2024, for example, distributions of the Forex ($2.3 billion) and Euribor ($671 million) settlements resulted in outsized payments to certain claimants.
FRT helps clients maximize recoveries in investment-related antitrust cases. To access our proprietary querying memo for the Interest Rate Swaps settlement and discuss your firm’s filing options ahead of the June 16 claim deadline, please contact our team using the form on this page or by emailing learnmore@frtservices.com.