Ten of the world’s largest banks, including JPMorgan Chase and Bank of America, have been sued for allegedly conspiring over nearly 14 years to rig prices within the $9.6 trillion U.S. corporate bond market, costing ordinary investors billions of dollars.
The proposed class-action lodged Tuesday in federal court in Manhattan stated the banks have since August 2006 breached antitrust law by overcharging investors on “odd-lot” trades that are worth less than $1 million and comprise 90% of all corporate bond trading.
Other defendants include Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, Royal Bank of Scotland and Wells Fargo & Co, or their respective affiliates.
According to the 81-page criticism, the banks leveraged their energy from dealing with over two-thirds of U.S. company bond underwriting to quietly inflate spreads between the prices where they would purchase and sell odd-lot bonds.
This reportedly resulted in spreads 25% to 300% higher than on “round-lot” trades over $1 million, which are usually performed by institutional investors, enabling the banks to reap higher compensation while boosting retail investors’ trading costs.
Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, and Wells Fargo refused to comment. Representatives of the other banks did not instantly reply to requests for remark.
The investors are headed by Isabel Litovich, a San Juan, Puerto Rico, resident who stated the collision lead to overcharges on odd-lot bond trades via her Morgan Stanley account.