Big banks defeat antitrust lawsuit in US over bond trades

A federal judge on Tuesday dismissed an antitrust lawsuit accusing 10 large banks of conspiring to rig corporate bond prices at the expense of ordinary investors, after the original judge recused himself because his wife owned stock in one of the banks.

Investors accused Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, NatWest, and Wells Fargo of overcharging them by billions of dollars since 2006 on “odd-lot” trades.

Such trades involve fewer than 1,000 bonds or are worth less than $1 million, and comprise most corporate bond trades. Investors said the banks illegally charged spreads 25% to 300% higher than on larger “round-lot” trades, inflating profits.

US District Judge Valerie Caproni in Manhattan said the investors failed to prove the banks conspired to operate the Bond Desk, Trading Edge and Trade Web platforms as a “catch-and-kill” operation to thwart fair prices, while boycotting rival platforms that promoted fair prices.

Though the banks controlled an estimated 65% of U.S. underwriting and 90% of US trading volume in corporate bonds, “it does not follow that defendants have the power to control pricing of the bonds in the secondary market,” Caproni said.

The judge also found no overt acts by the banks to advance the alleged conspiracy in the four years before the lawsuit was filed in April 2020, dooming the Sherman Act case.

Lawyers for the investors did not immediately respond to requests for comment. Caproni’s dismissal is with prejudice, meaning the case cannot be brought again.

The case was originally dismissed by US District Judge Lewis Liman in October 2021.

Four months later, Liman’s clerk disclosed that the judge’s wife owned Bank of America stock while the case was pending, but it didn’t affect the judge’s decision making.

In July 2024, the federal appeals court in Manhattan revived the case, saying Liman’s conflict was “almost certainly” unknowing but could call his impartiality into question.

Liman was not accused of wrongdoing.

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