(CN) - Twelve of the world's biggest banks agreed to pay $1.86 billion to settle claims that they colluded to obstruct greater transparency in the credit default swap market.
A Los Angeles retirement fund led more than 10 plaintiffs in a class action lobbing antitrust claims at a dozen major banks, the International Swaps and Derivatives Association (ISDA), and its data-service provider Markit.
Bank of America, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Royal Bank of Scotland and UBS all were named as defendants.
The $1.86 billion settlement is one of the largest ever in an antitrust class action, according to a statement Thursday from class counsel at Quinn Emanuel Urquhart & Sullivan and Pearson, Simon & Warshaw.
Each of the banks has also agreed to changes in licensing procedures that will make it easier for electronic-trading platforms to enter the credit default swap market, a change intended to promote competition and transparency.
The class action had accused the banks of conspiring against the Credit Market Derivatives Exchange (CMDE), a credit default swap clearinghouse and exchange designed to promote transparency and competition.
Nonparties Citadel LLC and CME Group had created the CMDE as joint venture in 2008.
Through secret meetings, email exchanges and telephones, the banks conspired to shut it down before it hit the market, and they got Markit and the ISDA to withhold licensing information, according to the lawsuit.
The banks refused to deal with CMDE or similar enterprises in favor of the one clearinghouse it could control: ICE Clear Credit, the plaintiffs claimed.
Investigation by the U.S. Justice Department and the European Commission ensued when The New York Times blew the lid on the secret meetings in 2010.
Last year, U.S. District Judge Denise Cote rejected an attempt by the banks to dismiss the lawsuit as untimely and unsupported.
Though the banks claimed that their behavior was "self-interested conduct in reaction to the global financial crisis," Cote was skeptical.
"The financial crisis hardly explains the alleged secret meetings and coordinated actions," she wrote. "Nor does it explain why ISDA and Markit simultaneously reversed course."
Dan Brockett and Bruce Simon, co-lead counsel for the class, applauded the settlement in a joint statement.
"We are pleased that we have reached this exceptional settlement for the class, appropriate for the damages our clients suffered," they said. We look forward to the court reviewing the settlement and bringing this important matter to a just conclusion."
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