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July 31, 2013

Banks Face More Suits Over Swaps

Two financial institutions filed lawsuits alleging large banks have had an unfair stranglehold on the $25 trillion credit-default-swaps market, adding to a pile of complaints about antitrust violations in derivatives.

An affiliate of MF Global Holdings Ltd. filed a proposed class-action lawsuit Monday in an Illinois federal court alleging 11 banks engaged in anticompetitive practices, including blocking the company from becoming a clearing broker for swaps.

Separately, a unit of Germany’s Landesbank Baden-Wurttemberg filed on Monday a proposed class-action lawsuit in Illinois against 13 banks alleging they created similar barriers to entry.

Both lawsuits said market participants lost tens of billions of dollars due to the alleged anticompetitive behavior. Credit-default swaps are insurance-like contracts that pay out when a country or a company defaults on its debts. The swaps have reaped huge profits for banks.”

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Read full Wall Street Journal article here

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