In Re: Credit Default Swaps Antitrust Litigation
www.CDSAntitrustSettlement.com

Frequently Asked Questions

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BASIC INFORMATION

1. Why did I receive a Settlement Notice?

You or your company may have entered into a CDS Transaction between January 1, 2008, and September 25, 2015.

You have the right to know about this litigation and about your legal rights and options before the Court decides whether to approve the proposed settlements. If the Court approves the settlements and after any objections or appeals are resolved, an administrator appointed by the Court will make the payments that the settlements allow. You will be informed of the progress of the settlements.

The Notice explains the litigation, the proposed settlements, your legal rights, what benefits are available, who is eligible for them, and how to get them.

The Court supervising the case is the United States District Court for the Southern District of New York. The case is called In re: Credit Default Swaps Antitrust Litigation, Master Docket No.: 13 MD 2476 (DLC). The people who sued are called Class Plaintiffs, and the companies they sued are called Defendants.

Please note that the Fairness Hearing was held on April 15, 2016. Judge Cote approved the proposed settlements and the Plan of Distribution. All objections to the Plan of Distribution were overruled. Final judgments and orders were entered by the court on April 18, 2016, and can found under the “Important Documents” tab.

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2. What is this litigation about?

The lawsuit alleges that Defendants engaged in anticompetitive acts that affected the price of CDS in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The lawsuit also alleges that Defendants were unjustly enriched under common law by their anticompetitive acts. The lawsuit was brought by, and on behalf of, purchasers and sellers of CDS. The lawsuit is proceeding in the United States District Court for the Southern District of New York before Judge Denise Cote.

The entities that prosecuted this lawsuit, referred to as “Class Plaintiffs,” are the Los Angeles County Employees Retirement Association; Salix Capital US Inc.; Value Recovery Fund LLC; Delta Institutional, LP; Delta Onshore, LP; Delta Offshore, Ltd.; Delta Pleiades, LP; and Essex Regional Retirement System.

Among other things, Class Plaintiffs allege that, beginning in 2008, Defendants conspired to prevent exchange trading of CDS at secret meetings and through telephone and email communications. Class Plaintiffs allege that the Dealer Defendants agreed with each other not to deal with any central clearing platform that might allow CDS trading and instead to clear almost all transactions through the one clearinghouse they could control, ICE Clear Credit LLC (“ICE”). Class Plaintiffs further allege that the Dealer Defendants conspired to limit changes to the over-the-counter CDS market and imposed rules restricting participation in ICE that were designed to prevent a transition to exchange trading. Class Plaintiffs allege that the Dealer Defendants pressured Markit and ISDA not to grant any licenses that allowed CDS to trade via central limit order book or on an exchange platform, thus ensuring that some Dealer Defendant be on at least one side of every CDS transaction. According to Class Plaintiffs, Defendants’ conduct harmed Settlement Class Members by keeping the CDS market opaque, preventing competition, and maintaining inflated bid/ask spreads on CDS Transactions. The Defendants deny they did anything wrong.

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3. Why is this a class action?

A class action is a lawsuit in which a few representative plaintiffs bring a lawsuit on behalf of themselves and other similarly situated persons (i.e., the class) who have similar claims against the defendants. The Class Plaintiffs, the Court, and counsel appointed to represent the class all have a responsibility to make sure that the interests of all class members are adequately represented.

Importantly, class members are NOT individually responsible for the attorneys’ fees or litigation expenses. In a class action, attorneys’ fees and litigation expenses are paid from the settlement fund (or the court judgment amount) and must be approved by the Court. If there is no recovery, the attorneys do not get paid.

When a class enters into settlements, such as these settlements with Defendants here, the Court will require that the members of the class be given notice of the settlements and an opportunity to be heard. The Court then holds a hearing to determine, among other things, if the settlements are fair, reasonable, and adequate to the members of the class.

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4. Why are there settlements?

The Court did not decide in favor of Class Plaintiffs or Defendants. Class Plaintiffs and their Co-Lead Counsel thoroughly investigated the facts and law regarding the claims at issue in this litigation, as well as Defendants’ potential defenses. As a result, Class Plaintiffs think they could have won substantial damages at trial. Class Plaintiffs developed a preliminary model, based upon a number of assumptions that Defendants vigorously disputed, which estimated that the damages the Settlement Class could potentially seek at trial were approximately $8 to $12 billion. The settlements represent a recovery of 15% to 23% of the damages that might have been sought based on Class Plaintiffs’ preliminary model. Defendants think Class Plaintiffs’ claims lack merit and believe the claims would have been rejected either prior to trial, at trial or on appeal. Defendants believe the trial court or an appellate court would have prevented Class Plaintiffs from litigating the case as a class action. Defendants also dispute the premises and output of Class Plaintiffs’ preliminary damages model, and do not believe Class Plaintiffs could have ever proven any damages to the putative class, in which case the class would receive nothing. None of those issues were decided. Instead, after engaging in lengthy, detailed negotiations with the help of a nationally-recognized mediator, all parties agreed to settle the case. That way, they will avoid the cost and risk of adverse outcomes before or after trial or on appeal, and the people affected will get compensation. Class Plaintiffs and their Co-Lead Counsel think the settlements are best for all Settlement Class Members.

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WHO CAN PARTICIPATE IN THE SETTLEMENTS

5. How do I know if I am part of the settlements?

The Court decided that everyone who fits this description is a Settlement Class Member: All persons or entities (together, “Persons”) who, during the period of January 1, 2008 through September 25, 2015, purchased CDS from or sold CDS to the Dealer Defendants, their respective affiliates, or any purported co-conspirator, in any Covered Transaction. The settlement agreements define a Covered Transaction as follows:

“A purchase or sale of CDS shall be deemed to be a “Covered Transaction” in each of the following circumstances: (i) if the purchase or sale was by or on behalf of a Person either domiciled or located (e.g., had a principal place of business) in the United States or its territories at the time of such purchase or sale; (ii) if the Person was domiciled and located outside the United States and its territories at the time of any such purchase or sale, where such purchase or sale was in United States commerce; or (iii) where such purchase or sale otherwise falls within the scope of the U.S. antitrust laws.”

Examples of a “Covered Transaction” include: (i) you are domiciled or located in the United States or its territories and you made a CDS Transaction with a Dealer Defendant or one of its affiliates; (ii) you are domiciled and located outside the United States or its territories and you made a CDS Transaction with a Dealer Defendant or one of its affiliates located in the United States or its territories; or (iii) you are domiciled and located outside the United States or its territories and you made a CDS Transaction with a Dealer Defendant or one of its affiliates that was executed through a desk located in the United States or its territories.

The above examples are not intended to be exclusive of what constitutes a “Covered Transaction.” To the extent you believe you made a CDS Transaction that is a “Covered Transaction,” you will be given the opportunity to identify that transaction and submit supporting evidence to the claims administrator.

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6. Are there exceptions to being included in the Settlement Class?

Yes. You are not included in the Settlement Class if you are:

  • a Defendant, or its current subsidiary or affiliate;
  • an officer, director, management, or employee of a Defendant; or
  • a Person whose exclusion is mandated by law.

However, “Investment Vehicles” are not excluded from the Settlement Class. For purposes of the settlements, an Investment Vehicle means any investment company or pooled investment fund, including, but not limited to: (i) mutual fund families, exchange-traded funds, fund of funds and hedge funds, in which a Defendant has or may have a direct or indirect interest, or as to which its affiliates may act as an investment advisor, but of which a Defendant or its respective affiliates is not a majority owner or does not hold a majority beneficial interest, and (ii) any Employee Benefit Plan as to which a Defendant or its affiliates acts as an investment advisor or otherwise may be a fiduciary.

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7. What if I’m still not sure if I am included in the Settlement Class?

Please note that the deadline to submit a claim or challenge your eligibility has passed. If you would still like to know if you were included in the Settlement Class, you can ask for free help. You can call 1-888-744-0531 or visit www.CDSAntitrustSettlement.com for more information.

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THE SETTLEMENT BENEFITS

8. What do the settlements provide?

Defendants will collectively pay the Settlement Class $1,864,650,000 (the “Settlement Fund”). The Settlement Fund, less any costs associated with notifying the Settlement Class, claims administration, and Court-awarded attorneys’ fees, expenses, and incentive awards to Class Plaintiffs for representing the Settlement Class, will be divided among all Settlement Class Members who sent in a valid proof of claim form.

In addition to the cash component, the settlement with ISDA provides for corporate governance reforms on the licensing of ISDA intellectual property, as follows: ISDA will disband the Credit Steering Committee Licensing Sub-Committee and replace it with an independent licensing sub-committee, called the “Licensing Sub-Committee,” which will have 8 to 10 members consisting of an equal number of buy-side and sell-side firms. All decisions on licensing will be by simple majority vote. The ISDA Board will delegate full authority to the Licensing Sub-Committee to decide whether to grant requested licenses. If the Licensing Sub-Committee decides not to grant a proposed license, it will provide to the proposed licensee an opportunity to rebut the determination or modify its application. Any decision not to grant a license will be subject to an outside dispute resolution mechanism. All meetings of the Licensing Sub-Committee should be open to the public via broadcast through ISDA’s website, unless a proposed licensee objects. Decisions of the Licensing Sub-Committee regarding requests for licenses will be published on ISDA’s website, unless a proposed licensee objects.

In the event any Defendant terminates its settlement agreement (“Settlement Agreement”) and the litigation of the action continues against that Defendant, Settling Defendants have agreed to provide certain reasonable cooperation including making available up to four current or former employees from each Settling Defendant as witnesses in the ongoing litigation.

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9. Can the Settlement Amount be reduced or the Settlement terminated?

In certain circumstances each Defendant has the right to request a modification of the Settlement Amount or to terminate the Settlement. The right to seek reduction in the Settlement Amount or to terminate the Settlement is set forth at Paragraphs 11(a) through 11(c) of the Settlement Agreement with each Defendant. Should one or more members of the Settlement Class timely exercise their rights to be excluded from the Settlement Class, a Settling Defendant, if it believes that the total Requests for Exclusion from the Settlement Class represent a material portion of the Covered Transactions and their exclusion would materially reduce the value of Settlement, shall have the option to present the issue to the settlement mediator, Judge Daniel Weinstein (Ret.). In the event Judge Weinstein determines some reduction in the Settlement Amount is appropriate, he may not reduce the Settlement Amount by greater than a one-to-one ratio. That is, the amount a Settlement Class member who chooses to remain as part of the Settlement Class will receive will be at least the same as if no one had requested exclusion from the Settlement Class. A Settling Defendant may also seek to terminate the Settlement by making an application for termination to Judge Weinstein. Upon such application Judge Weinstein shall determine if the reduction remedy set forth above in this Paragraph is not adequate to preserve the essential benefits of the Settlement to the Settling Defendant making such application. Should a Settlement be terminated, the Parties shall revert to their respective status in the Action as of the date they executed the Settlement Agreement.

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10. Will I get a payment?

If you are a Settlement Class Member and did not opt out of the Settlement Class, you were eligible to file a proof of claim form to receive your share of money from the settlements. The amount of your payment will be determined by the Plan of Distribution. Plaintiffs allege that Defendants’ anticompetitive conduct artificially inflated the spreads on all CDS transactions throughout the Class Period. Plaintiffs allege that but for Defendants’ anticompetitive conduct, some CDS transactions would have migrated from over-the-counter trading to exchanges with a central limit order book, which would have resulted in greater pre- and post-trade transparency and other market efficiencies, thus compressing the artificially-inflated spreads on CDS traded on an exchange and those that would have continued to trade over the counter. This is disputed by Defendants.

Co-Lead Counsel retained experts who constructed a model to identify the amount of inflation of the spreads on any given CDS transaction at any given date during the Class Period. The model uses the database of CDS transactions maintained by the Depository Trust & Clearing Corporation (“DTCC”), produced in this litigation, which all market participants accept as the legal record of a CDS transaction. The model identifies CDS purchase and sales transactions executed from January 1, 2008, through September 25, 2015, which may be eligible to receive distributions from the Net Settlement Fund (the amount remaining after attorneys’ fees, litigation costs and claims administration costs have been deducted) under the Settlement Class definition upon proper and timely submission of a claim.

Co-Lead Counsel’s experts have identified a spread compression percentage that will be applied to Covered Transactions to generate the amount of each Settlement Class Member’s potential claim. Each Settlement Class Member was sent a claim form that directed the Settlement Class Member to a secured website maintained by the claims administrator to review information about that member’s Covered Transactions, as recorded in the DTCC database. The secured website provided the Settlement Class Member with: (i) the name of the CDS purchased or sold with the unique identification number (RED Code); (ii) the date of the transaction; (iii) the notional amount of the transaction; (iv) the tenor of the transaction (number of years, typically 5 years); (v) for CDS indices, the series; and (vi) the allowed claim (amount of inflated spread paid) for that CDS transaction.

The Net Settlement Fund will be distributed to all Settlement Class Members who submitted claims on a pro rata basis. Specifically, the distribution of the Net Settlement Fund will be based on the percentage of each Settlement Class Member’s allowed claim as compared to the sum of all valid, allowed claims that are filed. The Net Settlement Fund will be paid out to Settlement Class Members who made proper and timely claims. No monies revert to Defendants. The Court must decide whether to approve the proposed Plan of Distribution and will consider that at the Fairness Hearing.

Please note that the Fairness Hearing was held on April 15, 2016, and the Plan of Distribution was approved by Judge Cote. The order approving the Plan of Distribution was entered on April 18, 2016, and can be found under the “Important Documents” tab.

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11. How can I get a payment?

To qualify for payment, you must have sent in a proof of claim form by May 27, 2016.

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12. When will I receive a payment?

The first distribution payment was issued to all eligible class members on December 28, 2016. Consistent with the Court’s Distribution Order, a portion of the funds was set aside as a reserve to cover Class Member appeals of the challenge process. The amount of the reserve was $120 million, plus interest earned on the settlement funds. A second and final distribution, consisting of funds held in reserve plus interest earned thereon and exclusive of administration expenses, took place on July 17, 2017, and was issued to all eligible class members who did not receive full payment in the first distribution. Class members whose total award is less than $1,000 received their entire payment in the December 28, 2016 distribution and will not receive a payment in the second distribution.

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13. What am I giving up to get a payment or stay in the Settlement Class?

Unless you excluded yourself, you are staying in the Settlement Class, and that means you can’t sue, continue to sue, or be part of any other lawsuit against Defendants or the Released Parties about the legal issues in this case. It also means that all of the Court’s orders will apply to you and legally bind you. As described in the Settlement Agreements, upon the Effective Date of settlement, each of the Releasing Parties: (i) shall be deemed to have, and by operation of the Final Judgment and Order of Dismissal, shall have, fully, finally, and forever waived, released, relinquished, and discharged to the fullest extent permitted by law all Released Claims against the Released Parties, regardless of whether such Releasing Party executes and delivers a proof of claim; (ii) shall forever be enjoined from prosecuting in any forum any Released Claim against any of the Released Parties; and (iii) agrees and covenants not to sue any of the Released Parties with respect to any Released Claims or to assist any third party in commencing or maintaining any suit against any Released Party related in any way to any Released Claims. The capitalized terms used in this paragraph are defined in the Settlement Agreements, which can be accessed on this website.

A full description of the claims you are giving up against Defendants and the Released Parties is set forth in the Settlement Agreements at Paragraphs 4(a) – (f), which may be obtained on this settlement website, www.CDSAntitrustSettlement.com, or by contacting the Claims Administrator at 1-888-744-0531. Unless you excluded yourself, you are “releasing” the claims described in the Settlement Agreements, whether or not you later submitted a claim.

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EXCLUDING YOURSELF FROM THE SETTLEMENTS

If you don’t want a payment from these settlements, but you want to keep the right to sue or continue to sue Defendants, on your own, about the legal issues in this case, then you must take steps to get out of the Settlement Class. This is called excluding yourself-or is sometimes referred to as “opting out” of the Settlement Class.

14. What if I do not want to be in the Settlement Class?

The deadline to exclude yourself from the settlements has passed. If you excluded yourself from, or “opted out” of, the Settlement Class, you are free to sue Defendants or any of the other Released Parties on your own for the claims being resolved by the settlements. However, you will not receive any money from the settlements, and Co-Lead Counsel no longer represent you with respect to any claims against Defendants.

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15. How do I get out of the settlements?

The deadline to exclude yourself from the settlements was February 29, 2016. If you did not exclude yourself by the deadline, you are a Settlement Class Member and are bound by the terms of the Settlement.

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16. If I exclude myself, can I get money from the settlements?

No. You will not get any monetary benefits of the settlements, if you exclude yourself.

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17. If I exclude myself, can I comment on the settlements?

No. If you exclude yourself, you are no longer a member of the Settlement Class and may not comment on or object to any aspect of the settlements.

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COMMENTING ON OR OBJECTING TO THE SETTLEMENTS

18. How can I tell the Court what I think about the settlements?

The deadline to comment or object to the settlements was February 29, 2016.

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19. What’s the difference between objecting and excluding?

Objecting is simply telling the Court that you do not like something about the settlements. You can object only if you stay in the Settlement Class. Excluding yourself is telling the Court that you do not want to be part of the Settlement Class. If you exclude yourself, you have no basis to object because the settlements no longer affect you.

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THE LAWYERS REPRESENTING YOU

20. Do I have a lawyer in this case?

Yes. The Court has appointed the firms listed below to represent you and the Settlement Class in this case:

Daniel L. Brockett
Quinn Emanuel Urquhart & Sullivan, LLP
51 Madison Avenue, 22nd Floor
New York, New York 10010-1601
(212) 849-7000
Bruce L. Simon
Pearson, Simon & Warshaw, LLP
44 Montgomery Street, Suite 2450
San Francisco, California 94104
(415) 433-9000

These lawyers are called Co-Lead Counsel. Co-Lead Counsel will apply to the Court for payment of attorneys’ fees and expenses from the Settlement Fund. You will not otherwise be charged for Co-Lead Counsel’s services. If you want to be represented by your own lawyer, you may hire one at your own expense.

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21. How will the lawyers be paid?

The Settlement Agreements provide that Co-Lead Counsel may apply to the Court for an award of attorneys’ fees and reimbursement of costs out of the Settlement Fund. The motion by Co-Lead Counsel for attorneys’ fees and costs and incentive awards is available for viewing on the Settlement Website under the “Important Documents” tab.

The Court approved Co-Lead Counsel’s requests for attorneys’ fees and expenses awards at the Fairness Hearing. The order granting approval was filed on April 18, 2016, and is available to view under the “Important Documents” tab.

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THE COURT’S FAIRNESS HEARING

22. When and where will the Court decide whether to approve the settlements?

The Court held a Fairness Hearing at 2:00 p.m. on April 15, 2016, at the United States District Court for the Southern District of New York, Daniel Patrick Moynihan United States Courthouse, Courtroom 15B, 500 Pearl Street, New York, NY 10007. At the Fairness Hearing, the Court considered whether the settlements are fair, reasonable and adequate, and whether the Plan of Distribution is fair and adequate. The Court also considered how much to pay Co-Lead Counsel and whether to approve litigation expenses and incentive awards to the Class Plaintiffs. Any comments or objections were considered by the Court at this time. At the hearing, Judge Cote approved the proposed settlements, awarded attorneys’ fees and reimbursement of Plaintiffs’ counsel’s litigation costs, and approved the Plan of Distribution. All objections to the Plan of Distribution were overruled. Final judgments and orders were entered by the court on April 18, 2016, and can be found under the “Important Documents” tab.

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23. Do I need to come to the hearing?

The Fairness Hearing was held on April 15, 2016. Settlement Class Members did not need to attend the hearing.

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24. May I speak at the hearing?

The Fairness Hearing was held on April 15, 2016.

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IF YOU DO NOTHING

25. What happens if I do nothing?

If you do nothing, you will not get any money from these settlements. Unless you excluded yourself, you will not be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Defendants or the Released Parties about the legal issues in this case.

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GETTING MORE INFORMATION

26. How do I get more information?

The Notice summarizes the settlements. More details are available in the Settlement Agreements. You can get complete copies of the Settlement Agreements by going to the Important Documents tab on this website. This website also has answers to common questions about these settlements, a claim form, and other information to help you determine whether you are a Settlement Class Member and whether you are eligible for a payment. You also may call 1-888-744-0531 or write to the Claim Administrator at Credit Default Swaps Antitrust Litigation, c/o Garden City Group, P.O. Box 10254, Dublin, OH 43017-5754.

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