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US District Judge dismisses Canadian benchmark rate rigging suit

U.S. District Judge Analisa Torres dismissed a suit against various big banks, which alleged that they suppressed the Canadian dealer offered rate to benefit the trading positions in their derivatives from Aug. 9, 2007, to June 30, 2014.

The Fire & Police Pension Association of Colorado filed the class-action suit in the U.S. District Court for the Southern District of New York. Defendants named in the suit include Bank of Montreal, Bank of America Corp., Deutsche Bank AG, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, HSBC Holdings PLC, National Bank of Canada, Royal Bank of Canada and Toronto-Dominion Bank.

The plaintiffs said the banks had a motive to suppress the Canadian dealer offered rate, or CDOR since they held more CDOR-based derivatives contracts than CDOR-based loans, meaning the banks had an overall net short exposure to the CDOR, during the class period. By suppressing the CDOR, the banks could pay lower interest payments, harming the plaintiffs and benefiting the defendants.

Judge Torres dismissed the suit without prejudice, saying the only time a bank could have a net short exposure to the CDOR was if the CDOR-receiving derivatives in its portfolio outweighed both CDOR-loans and CDOR-paying derivatives, which she says the plaintiffs failed to prove, as the evidence they submitted to court did not distinguish between CDOR-paying derivatives and CDOR-receiving derivatives.

The plaintiffs also tried to prove that the CDOR was artificially suppressed by saying the Canadian prime corporate paper rate, or CPCPR, was higher than the CDOR throughout the class period. However, Judge Torres noted that the plaintiffs contradicted their own claims when they presented a chart that showed that the CDOR was higher than the CPCPR in 2014 and the four years prior to that.