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(Bloomberg) — Twelve of the biggest dealers in the interest-rate swap trading market were accused in a lawsuit of conspiring to block fund managers from entering the exchange market.

The antitrust complaint filed in New York federal court by a public pension fund names most of the biggest U.S. and European investment banks among the defendants as well as trading platforms ICAP Capital Markets LLC and Tradeweb Markets LLC.

In their role as market-makers, the banks have prevented buy-side investors from trading the swaps on exchanges, according to the complaint. The total notional value of interest-rate swaps outstanding was about $320 trillion in the first half of 2015, according to a report this month by the Bank for International Settlements.
Buy-side investors are stuck in the banks’ “inefficient and antiquated” over-the-counter market and blocked from transparent, competitive pricing and faster trades so the dealers can preserve “an extraordinary profit center,” according to the complaint. This has allowed the dealers to “extract billions of dollars in monopoly rents, year after year,” the pension fund alleged in the complaint, which seeks class-action status.

Interest-rate swaps are a type of derivative that can swing in value when central banks change rates that pension funds, companies and municipalities use to manage risk and insulate themselves from rising interest rates, according to the complaint.
Representatives for Tradeweb didn’t immediately reply to e- mails and voice messages seeking comment on the complaint.

The lawsuit was reported earlier by Reuters.

The case is Public School Teachers’ Pension and Retirement Fund of Chicago v. Bank of America Corp., 1:15-cv-09319, U.S. District Court, Southern District of New York (Manhattan)>

–With assistance from Noah Buhayar and John Gittelsohn.

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Peter Blumberg