Bond Odd Lots Class Action

Korein Tillery & Co-Counsel File Class Action Antitrust Lawsuit Alleging 10 of the World’s Largest Banks Engaged in an Antitrust Conspiracy To Restrict Competition on Prices of Corporate Bonds for Odd-Lot Investors


On April 21, 2020, Korein Tillery and four co-counsel firms filed a class action lawsuit in the United States District Court for the Southern District of New York on behalf of Isabel Litovich and a proposed class of investors, alleging an antitrust conspiracy since August 1, 2006 by 10 of the world’s largest banks to restrain competition and fix prices on bid-offer spreads in so-called “odd lots” (lots of total size below $1 million) of corporate bonds. According to the complaint, this conspiracy violated § 1 of the Sherman Act, and may have cost odd-lot U.S. corporate bond investors billions of dollars over the proposed class period.

Trading in corporate bonds in the United States occurs in an over-the-counter, secondary market where dealers, such as the defendant banks in the case (Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Morgan Stanley, NatWest, and Wells Fargo), serve as liquidity providers and set prices to buy and sell bonds within the market. The Defendant banks handled more than two-thirds of U.S. corporate bond underwriting, and from there were able to serve as dealers on perhaps as much as 90% of all U.S. trading volume in the secondary, over-the-counter market for U.S. corporate bonds.

In foreign bond markets with lower volumes and liquidity than the U.S. corporate bond market, odd-lots of bonds in a given series trade at prices that are nearly identical with so-called “round lot” trades (trades of greater than $1 million in par value) in that same series – a result that should have occurred in the United States as well, particularly as electronic trading and record-keeping drove transaction costs to minimal levels.

However, rather than compete on pricing of corporate bonds in a way that benefited all investors, the Defendant banks only competed on pricing for round lot trades for large, institutional investors, and actively suppressed competition on pricing for primarily retail odd-lot investors. This conduct included group boycotts by the Defendants – including the withholding of liquidity – from electronic platforms that threatened to increase retail odd-lot investor pricing transparency and/or threaten the Defendants’ central intermediary roles as dealers with competitive, all-to-all trading.

As a direct result of this anticompetitive conduct by Defendants, odd-lot investors since at least August 1, 2006 have paid significantly higher prices to Defendants when buying corporate bonds, and received significantly lower prices from Defendants when selling corporate bonds, than round-lot investors in the same bond series. According to academic studies, this differential may have been 10 or more basis points greater for odd-lot investors than round-lot investors per transaction – an amount that resulted in odd-lot investors paying tens of billions of dollars more to trade in corporate bonds with Defendants than they would have paid if they had traded at the same spreads as round lot investors over the 2006-present time period. No reasonable economic justification explains this pricing disparity, other than the anticompetitive and illegal conduct of Defendants.

Plaintiff Isabel Litovich is represented by Korein Tillery LLC; Scott+Scott Attorneys at Law LLP; Criden & Love, P.A.; Erez Law, PLLC; and Aldarondo & Lopez-Bras. Korein Tillery attorneys involved in the investigation and filing of this case include George Zelcs, Stephen Tillery, Steven Berezney, Michael Klenov, Robert Litan, Randall Ewing, Chad Bell, Carol O’Keefe, and Ryan Cortazar.

Individuals or companies who traded in odd lots of corporate bonds between August 1, 2006 and the present who believe that they might have received worse pricing in those trades due to this price-fixing conspiracy and who are interested in potentially joining the lawsuit are encouraged to contact George Zelcs of Korein Tillery (312-641-9750; gzelcs@koreintillery.com).

The case is Litovich v. Bank of America Corp., et al., Case No. 1:20-cv-03154 (S.D.N.Y.). Complaint

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