The Iowa Public Employees’ Retirement System, Orange County Employees Retirement System and Sonoma County Employees’ Retirement Association filed an anti-trust class action in the US Southern District Court of New York on 16 August and called for treble damages and injunctive relief.
The pension plans alleged that “having formed EquiLend, the prime broker defendants made it clear to market participants that all new entrants into the market would need to go through EquiLend”.
Alleged systematic suppression of free market development by the defendants, which include Morgan Stanley, J.P. Morgan, Bank of America, Credit Suisse, and UBS, occurred between 2009 and 2016.
According to the complaint, the defendants aimed to maintain high fees for their stock loan services by boycotting start-up lending platforms and threatening clients to do the same.
The complaint continued: “Recognising the nascent threat posed by all-to-all electronic trading, the prime broker defendants took steps to organise themselves into a working cartel. Their first step was to form a ‘dealer consortium’ to protect their mutual interests.”
One such platform was Quadriserv’s Automated Equity Finance Markets, commonly known as AQS, according to the pension plans.
EquiLend, which launched in 2002 as a joint venture to provide post-trade and trading services in securities lending, acquired AQS last year for an undisclosed sum.
The pension plans also alleged that the defendants targeted securities lending platform SL-x, which was “forced” to shut down in 2014.
EquiLend, Bank of American, J.P. Morgan and UBS declined to comment. The other defendants did not immediately respond to requests for comment.