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(Adds comments from additional defendants)
By Jonathan Stempel
NEW YORK, Sept 11 (Reuters) - Twelve major banks havereached a $1.865 billion settlement to resolve investor claimsthat they conspired to fix prices and limit competition in themarket for credit default swaps, a lawyer for the investors saidon Friday.
The settlement in principle was disclosed at a hearingbefore U.S. District Judge Denise Cote in Manhattan.
"We think it's historic," Daniel Brockett, the investors'lawyer, said in an interview. "It's one of the largest antitrustclass-action settlements, and an extraordinary result for theclass."
The defendants include Bank of America Corp,Barclays Plc, BNP Paribas SA, Citigroup Inc, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc, HSBC Holdings Plc, JPMorgan Chase & Co, Morgan Stanley,Royal Bank of Scotland Group Plc and UBS AG.
Other defendants are the International Swaps and DerivativesAssociation (ISDA) and Markit Ltd, which providescredit derivative pricing services.
Credit default swaps are contracts that let investors buyprotection to hedge against the risk that corporate or sovereigndebt issuers will not meet their payment obligations.
The market peaked at $58 trillion in 2007, according to theBank for International Settlements, but shrank to $16 trillionseven years later as investors better understood its risks.
American International Group Inc's CDS exposure wasa major factor behind the 2008 federal bailout of that insurer.
In the lawsuit, investors including the Los Angeles CountyEmployees Retirement Association and Salix Capital US Incclaimed that the defendants' activity caused them to pay unfairprices on CDS trades from late 2008 through the end of 2013,even though improved liquidity should have driven costs down.
They also said the banks tried in late 2008 to thwart thelaunch of a credit derivatives exchange being developed by CMEGroup Inc by agreeing not to use new CDS platforms andpushing ISDA and Markit not to provide licenses to the exchange.
An ISDA spokeswoman said the group is "pleased the matter isclose to resolution" and committed to helping ensure the safeand efficient functioning of the CDS market.
Representatives for the other defendants declined tocomment.
U.S. and European regulators have also examined potentialanti-competitive practices in the CDS market.
Investors' lawyer Brockett, a partner at Quinn EmanuelUrquhart & Sullivan, said Cote gave both sides two weeks to ironout details before submitting a settlement for her preliminaryapproval.
Quinn Emanuel and Pearson, Simon & Warshaw are co-leadcounsel for the plaintiffs.
The case is In re: Credit Default Swaps AntitrustLitigation, U.S. District Court, Southern District of New York,No. 13-md-02476. (Reporting by Jonathan Stempel in New York; Additionalreporting by Joseph Ax; Editing by Christian Plumb, Alan Crosbyand Jonathan Oatis)
