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Eurozone Government Bonds Anticompetitive Collusion Class Action

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The complaint for this class action brings suit against Bank of America, Merrill Lynch, the Royal Bank of Scotland (RBS, now NatWest Markets), and other financial companies for an alleged anticompetitive scheme to fix the price of Euro-denominated bonds issued by European central banks and sold in the US. 

The class for this action is all persons or entities who bought or sold Eurozone Government Bonds in the US directly from defendants from at least as early as January 1, 2007 through at least December 31, 2012.

These Eurozone Government Bonds are sovereign debt issued by central banks in countries that have adopted the Euro as their currency, with a total market value of around $9.4 trillion. They are bought by institutional investors, mutual funds, hedge funds, and pension funds in the US.

The defendants in this action are some of the largest dealers in these bonds. They quote bid (buy) and ask (sell) prices to interested investors, and the smaller the spread between bid and ask, the better the deal for investors. They compete for bonds in the primary market—the selling of the bonds when they are issued—and the issuing banks often favor those who can sell them in the secondary market, to provide liquidity. 

Those who can buy bonds in the primary market are known as primary dealers. They receive special privileges that give them power and influence. For example, they may be given non-public information about new bond issues or customer information that lets them assess the market for a particular bond issue. To ensure a competitive market, the primary dealers are supposed to compete with each other, so that investors can obtain better prices. 

However, the complaint alleges that the defendants in this case conspired to fix prices of the bonds. They did this by widening the spreads, the complaint alleges, increasing the prices investors paid for the bonds and decreasing the prices at which investors could sell the bonds.

In a competitive market, dealers could not keep a wide spread without losing customers to other parties. However, the illicit anticompetitive agreement allowed them to collude and offer similar prices. The complaint says they used instant messaging and chatrooms to discuss customers and their orders before settling on prices. 

European regulators uncovered the scheme, claiming in a Statement of Objections in January 2019 that eight banks “participated in a collusive scheme that aimed at distorting competition when acquiring and trading European government bonds (‘EGBs’). Traders employed by the banks exchanged commercially sensitive information and coordinated on trading strategies.”

The Statement of Objections is a preliminary opinion. If confirmed, the banks may be fined up to 10% of their global revenue. However, that doesn’t help the investors who overpaid. This class action aims at recovering some of those overpayments by American investors. 

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