Tera Group, Inc. v. Citigroup, Inc.

Tera Group, Inc., Tera Advanced Technologies, L.L.C., and TeraExchange, L.L.C. (collectively Tera) (plaintiffs), founded by a group of former Wall Street traders, intended to launch a platform to be known as TeraExchange, designed for the transparent trading of credit-default swaps. Specifically, TeraExchange was planned to be a swap-execution facility registered with the Commodity Futures Trading Commission (CFTC) pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Prior to the enactment of Dodd-Frank, the pricing for swaps, including credit-default swaps, could be determined only through the buy-side customer making a request for a quote to the market maker, thereby providing the market maker with important and valuable information regarding its customers’ trading strategies. Among other regulatory changes, Dodd-Frank sought to increase transparency in the swap market by allowing swaps to be traded on regulated swap-execution facilities in which market participants could make bids and offers on all swaps, including credit-default swaps, in the manner they would trade common stock. Tera intended for their swap-execution facility to be anonymized such that counterparties would be unknown to each other. After making significant investment and receiving temporary certification as a swap-execution facility, Tera launched an aggressive marketing campaign to garner liquidity for the platform. Initially, there was overwhelming interest in the platform. However, shortly after the first anonymous swap transaction took place on TeraExchange on June 12, 2014, a group of financial institutions (the financial institutions) (defendants) allegedly conspired to shut down TeraExchange. As alleged by Tera, the financial institutions nearly simultaneously decided to boycott TeraExchange without any legitimate basis for doing so and coerced buy-side customers to continue trading swaps pursuant to the status quo. Tera filed suit against the financial institutions, alleging, among other claims, violations of § 1 of the Sherman Antitrust Act. The financial institutions argued that the antitrust claim should be dismissed because Tera failed to plausibly allege a conspiracy. In response, Tera argued that a conspiracy could be inferred from the financial institutions’ parallel conduct as well as their common motive and high degree of interfirm communication.