LONDON - European antitrust regulators on Monday accused some of the world’s largest banks of collusion to block competition from the credit derivatives market.
The European Commission said it had issued the complaint against the firms, including Citigroup and JPMorgan Chase, after finding evidence that they had tried to prevent exchanges from entering the credit derivatives business between 2006 and 2009.
The European Commission, which oversees antitrust regulation, said a two-year investigatio found evidence that the global banks had worked with the International Swaps and Derivatives Association, a trade body, and the data firm Markit to block new entrants in part of the derivatives market.
In particular, the firms’ actions stopped both Deutsche Börse and the CME from gaining financial information needed to enter the market for credit default swaps.
These financial instruments are like a form of insurance that allows investors to be paid in full if the underlying bond defaults. Currently, they can be traded bilaterally between firms through the so-called over-the-counter market, though new regulation is forcing derivatives to be handled through clearinghouses, financial intermediaries that guarantee trades if one side defaults.
“It would be unacceptable if banks colle! ctively blocked exchanges to protect their revenues from over-the-counter trading of credit derivatives,†the European Union’s competition commissioner, JoaquÃn Almunia, said in a statement.
The 13 banks involved in the case are Bank of America Merrill Lynch, Barclays, Bear Stearns, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Royal Bank of Scotland and UBS, as well as the International Swaps and Derivatives Association and Markit.
The European Commission’s antitrust powers include levying fines as much as 10 percent of a firm’s global annual sales, though fines are typically much lower.
