Anyone who traded credit default swaps (“CDSs”) in the US between 1 January 2008 and 25 September 2015 should consider submitting a claim to participate in the settlement of a US class action concerning anticompetitive behaviour in the CDS market. The court has preliminarily approved the settlement and a hearing on final approval is scheduled for 15 April 2016. The current deadline for class members to submit settlement claim forms is 27 May 2016.

The European Commission’s announcement on 4 December 2015 that it was closing its investigation into possible anticompetitive practices in the CDS market by 13 of the world’s leading banks was hard to reconcile with the fact that, three months earlier, most of those banks paid $1.865 billion to settle a US class action relating to substantially the same allegations.

The key allegation in the US class action was that the banks conspired to frustrate attempts by CME Group Inc. to establish an exchange which would have permitted those wishing to buy and sell CDSs to trade directly with each other, as opposed to trading over-the-counter (“OTC”) with banks who buy and sell as a service for which they profit through a bid/ask spread - i.e. the margin between the bank’s “buy price” and “sell price” which almost invariably makes OTC less attractive than exchange trading.

Indeed, the European Commission’s Statement of Objections to the banks included more extensive allegations than those in the US class action in that, according to its July 2013 press release, the Commission suspected the banks of frustrating not just CME’s but also Deutsche Börse’s attempts to establish an exchange.

It is still possible that damages actions may be brought in Europe in respect of these allegations.

  1. The closure of the Commission’s investigation does not preclude it. The US settlement came after the US Department of Justice effectively closed its investigation.
  2. The US class action does not preclude it. It concerned only CDSs
    1. bought or sold by those domiciled or located in the US at the time of the transaction;
    2. bought or sold in the US by persons outside the US; and
    3. bought or sold that otherwise fall within the scope of U.S. antitrust laws.

However, where CDSs were bought or sold in the US, such trading is caught within the scope of the US settlement so there is an opportunity to claim a share of that settlement.