QS Holdco, the successor to Quadriserv which developed AQS, sued banks also named in a class action lawsuit by US pension funds, accusing them of running the platform into the ground. QS Holdco says Morgan Stanley and Goldman Sachs were at the center of the conspiracy.
Meanwhile, the banks asked a federal judge to throw out the US pension fund lawsuit, which also alleges a conspiracy to keep the US stock-loan market “in the Stone Age” to protect billions of dollars in revenue. Morgan Stanley, Goldman Sachs and Credit Suisse are among lenders whose prime brokerages were accused last year of colluding to boycott and ultimately destroy two electronic-trading platforms that tried to make the stock-loan market more transparent. Bank of America, UBS and J.P. Morgan were also sued.
In a joint filing last week, the banks said the alleged conspiracy is “implausible on its face” and urged US District Judge Katherine Polk Failla in Manhattan to dismiss it. A hearing on the request hasn’t been set. The investors are conflating stock lending with other products that may be better-suited to anonymous trading, the banks said.
The six banks also say the conspiracy allegation is undermined by the fact that some of the biggest brokerages in the stock-lending market — including Citigroup, Barclays and Deutsche Bank — weren’t sued. The plaintiffs claim to have plenty of evidence of collusion, including electronic chats, text messages, recorded phone calls and emails, according to the suit. The funds also describe how the banks allegedly sought to prevent other financial institutions and industry players from working with the platforms.
The dispute highlights the rise and fall of the trading platforms AQS and SLX, which saw themselves as a “natural step in the evolution of the stock-loan market,” pension funds in Iowa and California claim in the lawsuit. But after the platforms were “decimated” by the alleged conspiracy, the banks snapped up their patents and other assets through a joint venture to keep them from ever seeing the light of day, according to the suit.