(Adds ISDA and Markit comments, paragraph 9)
By Jonathan Stempel
NEW YORK, Sept 4 (Reuters) - A Manhattan federal judge saidon Thursday that investors may pursue a lawsuit accusing 12major banks of violating antitrust law by fixing prices andrestraining competition in the roughly $21 trillion market forcredit default swaps.
While dismissing part of the case, U.S. District JudgeDenise Cote said investors may press claims that the defendants'Sherman Act violations caused them to pay unfair prices on CDStrades from the autumn of 2008 through the end of 2013, even asimproved liquidity should have driven costs down.
"The complaint provides a chronology of behavior that wouldprobably not result from chance, coincidence, independentresponses to common stimuli, or mere interdependence," Cotesaid.
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 and Markit Ltd, which provides creditderivative 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 lawsuit seeks class-action status, and damages couldreach tens of billions of dollars.
"We are gratified with the decision," said Dan Brockett, apartner at Quinn Emanuel Urquhart & Sullivan representing theplaintiffs. "It will be a long, protracted battle."
All 12 banks and Markit declined to comment. ISDAspokeswoman Lauren Dobbs said the trade group believes it actedproperly, and the remaining claims have no merit.
U.S. and European regulators have probed potentialanticompetitive activity in CDS. In July 2013, the EuropeanCommission accused many of the defendants of colluding to blocknew CDS exchanges from entering the market.
In the lawsuit, investors accused the banks of trying inlate 2008 to quietly scuttle the launch of the Credit MarketDerivatives Exchange (CMDX), being developed in part by CMEGroup Inc.
Investors claimed the banks did this by agreeing not to usenew CDS platforms, and arranging for ISDA and Markit not toprovide licenses to CMDX as they had contemplated.
Cote rejected the banks' argument that their actions "justas plausibly" could have resulted from "independent businessdecisions" in response to the global financial crisis.
"The financial crisis hardly explains the alleged secretmeetings and coordinated actions," the judge wrote. "Nor does itexplain why ISDA and Markit simultaneously reversed course."
Citing a lack of evidence, Cote dismissed a claim accusingthe banks of colluding to monopolize trading, and claimspredating the autumn of 2008.
The case is In re: Credit Default Swaps AntitrustLitigation, U.S. District Court, Southern District of New York,No. 13-md-02476. (Editing by Matthew Lewis)