Banks Accused of Manipulating Derivatives Benchmark

A pension fund filed a lawsuit accusing nine banks of manipulating an interest rate benchmark in order to increase derivatives trading profits.

In a class action complaint filed in the U.S. District Court for the Southern District of New York, the Fire & Police Pension Association of Colorado ("plaintiff") alleged that the banks manipulated the Canadian Dealer Offer Rate ("CDOR") between 2007 and 2014. CDOR is an interest rate benchmark that was "intended to reflect the cost of borrowing Canadian dollars in North America." According to the plaintiff, the banks conspired to suppress CDOR by submitting artificially low interest rate submissions to Thomson Reuters, which was responsible for calculating CDOR based on the banks' submissions, that did not reflect the true rate at which they were lending Canadian dollars in North America.

The plaintiff alleged that the banks colluded with the goal of increasing the profitability of their derivatives trading businesses by reducing interest that they would owe on CDOR-based derivatives, including interest rate swaps and forward rate agreements. The plaintiff noted that banks submitted "identical, artificially low CDOR submissions" to Thomson Reuters on numerous occasions. The plaintiff also accused the banks of using "electronic messaging, chatrooms, telephones, emails and other electronic means of communication" in order to coordinate and conceal their misconduct.

The banks are accused of CEA, antitrust, and racketeering violations. The plaintiff seeks certification of a class of "[a]ll persons or entities that engaged in U.S.-based transactions in financial instruments that were priced, benchmarked, and/or settled based on CDOR at any time from at least August 9, 2007, through June 30, 2014." In addition, the plaintiff seeks declaratory and injunctive relief, as well as treble damages on behalf of the class.