With rules implemented as a result of the Dodd-Frank Act set to dramatically increase the volume of centrally cleared over-the-counter (OTC) derivatives, the U.S. Department of Justice is scrutinizing whether major banks are using their influence to stifle competition in the $650 trillion market.
The probe is focused on LCH.Clearnet, a clearing house owned by its members, including JPMorgan Chase, Goldman Sachs and Deutsche Bank, and how these entities influence the clearing house’s fee structure. Because the clearing house is an essential part of the OTC derivatives infrastructure intended by the Dodd-Frank Act to decrease systemic risk, the DoJ is investigating whether the banks’ ownership of LCH.Clearnet gives them a competitive advantage.
“The Antitrust Division is investigating the possibility of anticompetitive practices in the credit derivatives clearing, trading and information services industries,” said Justice Department spokeswoman Alisa Finelli.
Read more about the investigation.