Banks accused of inflating odd-lot trade spreads see antitrust case dismissed with prejudice
Ten global banks accused of conspiring to inflate corporate bond prices will not face trial, after a US judge dismissed the case with prejudice, reported Reuters.
Investors alleged that Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, NatWest, and Wells Fargo had overcharged them by billions of dollars since 2006 through “odd-lot” trades.
Such trades involve fewer than 1,000 bonds or are valued at under US$1m and make up the bulk of corporate bond transactions.
Investors claimed spreads on these trades were 25 to 300 percent higher than on larger “round-lot” trades, inflating profits.
US District Judge Valerie Caproni in Manhattan ruled that the investors failed to prove the banks had conspired to use the Bond Desk, Trading Edge, and Trade Web platforms as a “catch-and-kill” system to suppress fair pricing, while simultaneously boycotting rival platforms that encouraged transparency.
Caproni said that while the banks controlled about 65 percent of US underwriting and 90 percent of US corporate bond trading volume, “it does not follow that defendants have the power to control pricing of the bonds in the secondary market.”
She also found no overt acts by the banks to advance the alleged conspiracy in the four years leading up to the April 2020 filing, ending the Sherman Act case.
The lawsuit was first dismissed in October 2021 by US District Judge Lewis Liman.
Four months later, Liman’s clerk disclosed that his wife owned Bank of America stock during the proceedings, though the disclosure noted it did not affect his decision-making.
The Manhattan federal appeals court revived the case in July 2024, finding that while Liman’s conflict was “almost certainly” unknowing, it could raise questions about impartiality.
Liman was not accused of wrongdoing.
Caproni’s latest ruling closed the case permanently, preventing investors from refiling. Lawyers representing the investors did not immediately comment on the decision.
The case is Litovich v Bank of America Corp et al, US District Court, Southern District of New York, No. 20-03154.
