- Goldman Sachs, JPMorgan among banks already dropped from case
- Settlement would avoid fines and any finding of liability
Markit Group Ltd. and the International Swaps & Derivatives Association are in settlement talks with the European Union in a bid to end a five-year antitrust investigation into the credit-default swaps industry, according to two people familiar with the discussions.
In a possible pact with regulators, Markit, a financial information provider, and ISDA, a derivatives industry group, would avoid any fines in exchange for making a binding pledge to change their behavior, said the people, who declined to be named because the talks are private.
More than a dozen banks including Goldman Sachs Group Inc. and JPMorgan Chase & Co. were dropped from the probe last year after the EU said it lacked evidence they conspired to shut exchanges out of the CDS market. Regulators pressed on with their case against Markit and ISDA.
Banks still remained potentially on the hook for any fine imposed on Markit, which was partly owned by several banks until its 2014 initial public offering, and ISDA, whose members include most global banks. Markit may be liable for fines “capped at 10 percent of the sum of the annual total worldwide revenue of each of the relevant dealers,” it said in a March filing.
ISDA declined to comment. The association said last year it "acted properly at all times" and "will continue to cooperate with regulatory authorities to resolve this matter."
Markit declined to immediately comment. It said last year it "believes it has acted properly and will continue to cooperate fully with the European Commission," according to an e-mailed statement.
“The commission’s investigation regarding Markit and ISDA is ongoing,” spokesman Ricardo Cardoso said in an e-mail. He declined to comment further.
Ending the case without a finding of liability could help Markit deflect lawsuits seeking damages for possible antitrust violations. Markit said it spent $5.6 million in 2014 and $3.7 million in 2015 on legal advisory fees linked to the EU and U.S. Department of Justice investigations and related lawsuits.
The probe initially centered on allegations that banks abused their leverage over Markit and the ISDA from 2006 to 2009 to block Deutsche Boerse AG’s Eurex and CMDX -- a CDS electronic trading platform planned by the CME Group Inc. and Citadel Investment Group Inc. -- to maintain more lucrative over-the-counter trading.
European lenders Barclays Plc, BNP Paribas SA, Credit Suisse Group AG, HSBC Holdings Plc, Royal Bank of Scotland Group Plc and UBS Group AG were targeted by the EU in the case. The other U.S. banks are Citigroup Inc., Morgan Stanley, Bank of America Corp. and Bear Stearns Cos., which JPMorgan acquired in 2008.
Some of Wall Street’s biggest financial institutions -- including Goldman Sachs, JPMorgan, Citigroup and HSBC -- agreed in September to a $1.87 billion settlement in the U.S. with a group of investors to resolve allegations they conspired to limit competition in the lucrative credit-default swaps market.
The U.S. Justice Department’s antitrust division had probed the conduct of Markit and the banks. The agency shelved the investigation in October 2013, people familiar with the matter said at the time.