State-Boston Retirement System and Boston public employees have filed a lawsuit against 22 leading banks and financial institutions for manipulating and financially benefitting from U.S Treasuries auctions.
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22 financial companies which deal primarily in U.S Treasury Bonds and other securities were dragged to court on 23-07-2015 on charges of conspiracy to manipulate treasury auctions which have harmed both borrowers and investors alike.
Some of the companies which have been accused of illegally trying to profit from the sale of Treasury Bills, bonds and notes at the expense of investors are, HSBC Holdings Plc (HSBA.L), Deutsche Bank (DBKGn.DE), JPMorgan Chase & Co (JPM.N), Goldman Sachs Group Inc (GS.N), Citigroup Inc (C.N), Merrill Lynch of Bank of America Corp, Credit Suisse Group AG CGSN.VX, UBS Group AG (UBSN.S) and 14 others.
The pension fund for Boston public employees and the State Boston Retirement System have filed a complaint in the U.S. District Court in New York that the said accused used instant messages, chat rooms and other means to exchange confidential customer related information so as to coordinate trading strategies in the $12.5 trillion U.S Treasury market.
Through this mechanism, the accused had inflated the prices of U.S treasuries at the pre-auction "when issued" market, and had deflated the prices of these treasuries when they had to buy them for their pre-auction sales. Through this mechanism they violated antitrust laws.
The primary dealers are those banks which have been authorised to transact directly with the Federal Reserve. They are the big boys in the U.S Treasury bond market and act as market makers for the secondary market.
"expert economists" working with the complainants said that they found wide gaps between when-issued prices and auction prices in December 2012. These gaps however narrowed significantly at the time when the U.S. Department of Justice along with other regulators began probing the alleged manipulation of the London interbank offered rate, which acts as a benchmark for interest rates for loans around the world. The market for these loans in is trillions of dollars.
"The only plausible explanation for the sharp break, is that defendants felt the heat of the DOJ's ongoing investigation into Libor, and ceased their efforts to manipulate the Treasury securities market because defendants' Treasury traders feared that they too would be prosecuted," said experts from the complainants.
As per available Media report, the Justice Department was also investigating possible collusion in the purchase and sale of Treasure auctions.
"The scheme harmed private investors who paid too much for Treasuries, and it harmed municipalities and corporations because the rates they paid on their own debt were also inflated by the manipulation. Even a small manipulation in Treasury rates can result in enormous consequences," said Michael Stocker, a partner at Labaton Sucharow, representing State-Boston.
The lawsuit has requested class action status on behalf of investors in Treasury securities, including those dealing in futures and options, between the period of 2007 to 2012. The lawsuit seeks unspecified triple damages.
When requested for comments from the respective spokesperson, the following companies, Citigroup, Credit Suisse, Goldman, HSBC, Bank of America, Deutsche Bank, and UBS, declined to comment. Other
The case is State-Boston Retirement System v Bank of Nova Scotia et al, U.S. District Court, Southern District of New York, No. 15-05794.
References:
http://www.reuters.com/article/2015/07/24/us-banks-lawsuit-treasury-auctions-idUSKCN0PY02E20150724
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22 financial companies which deal primarily in U.S Treasury Bonds and other securities were dragged to court on 23-07-2015 on charges of conspiracy to manipulate treasury auctions which have harmed both borrowers and investors alike.
Some of the companies which have been accused of illegally trying to profit from the sale of Treasury Bills, bonds and notes at the expense of investors are, HSBC Holdings Plc (HSBA.L), Deutsche Bank (DBKGn.DE), JPMorgan Chase & Co (JPM.N), Goldman Sachs Group Inc (GS.N), Citigroup Inc (C.N), Merrill Lynch of Bank of America Corp, Credit Suisse Group AG CGSN.VX, UBS Group AG (UBSN.S) and 14 others.
The pension fund for Boston public employees and the State Boston Retirement System have filed a complaint in the U.S. District Court in New York that the said accused used instant messages, chat rooms and other means to exchange confidential customer related information so as to coordinate trading strategies in the $12.5 trillion U.S Treasury market.
Through this mechanism, the accused had inflated the prices of U.S treasuries at the pre-auction "when issued" market, and had deflated the prices of these treasuries when they had to buy them for their pre-auction sales. Through this mechanism they violated antitrust laws.
The primary dealers are those banks which have been authorised to transact directly with the Federal Reserve. They are the big boys in the U.S Treasury bond market and act as market makers for the secondary market.
"expert economists" working with the complainants said that they found wide gaps between when-issued prices and auction prices in December 2012. These gaps however narrowed significantly at the time when the U.S. Department of Justice along with other regulators began probing the alleged manipulation of the London interbank offered rate, which acts as a benchmark for interest rates for loans around the world. The market for these loans in is trillions of dollars.
"The only plausible explanation for the sharp break, is that defendants felt the heat of the DOJ's ongoing investigation into Libor, and ceased their efforts to manipulate the Treasury securities market because defendants' Treasury traders feared that they too would be prosecuted," said experts from the complainants.
As per available Media report, the Justice Department was also investigating possible collusion in the purchase and sale of Treasure auctions.
"The scheme harmed private investors who paid too much for Treasuries, and it harmed municipalities and corporations because the rates they paid on their own debt were also inflated by the manipulation. Even a small manipulation in Treasury rates can result in enormous consequences," said Michael Stocker, a partner at Labaton Sucharow, representing State-Boston.
The lawsuit has requested class action status on behalf of investors in Treasury securities, including those dealing in futures and options, between the period of 2007 to 2012. The lawsuit seeks unspecified triple damages.
When requested for comments from the respective spokesperson, the following companies, Citigroup, Credit Suisse, Goldman, HSBC, Bank of America, Deutsche Bank, and UBS, declined to comment. Other
The case is State-Boston Retirement System v Bank of Nova Scotia et al, U.S. District Court, Southern District of New York, No. 15-05794.
References:
http://www.reuters.com/article/2015/07/24/us-banks-lawsuit-treasury-auctions-idUSKCN0PY02E20150724
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