Exchanges Beat High-Frequency Trading Lawsuit

A federal judge dismissed a long-running lawsuit accusing seven U.S. Stock Exchanges of defrauding ordinary investors on Monday. The litigation was quieted by allowing high-frequency traders to trade more quickly and at higher prices.

Exchanges, including the New York Stock Exchange, NASDAQ, and BATS Global Markets, were accused of providing high-frequency trading firms with enhanced order processing speeds and data feeds. They also allowed them to locate their servers close to the exchanges so that trading signals could be sent more quickly.

In a 46-page decision, U.S. District Judge Jesse Furman of Manhattan stated that investors in the class action were not able to prove they were injured by the actions of the exchanges, which they claimed violated federal securities laws.

The judge said that reports by the plaintiffs’ expert witness (a former high-frequency trader, who now consults about market structure) were not based on reliable methodology and did not track trading firms’ use of specialized services.

Furman stated that these reports were inadmissible and that “it follows the plaintiffs have adduced not admissible evidence their trades were harmed due to the exchanges’ challenged conduct”, denying them legal standing to sue.

The lawyers representing the investors and the exchanges didn’t immediately respond to inquiries for comment.

High-frequency traders make use of computer algorithms to achieve split-second trading benefits.

They were featured in Michael Lewis’ bestseller “Flash Boys”, published in March 2014. The suit was filed the following month.

BATS is now part CBOE Global Markets Inc, while NYSE is part Intercontinental Exchange Inc.

The city of Providence, Rhode Island, and several pension plans, which included one for Boston, led investors.

Furman had dismissed their claims in 2015. He found that the exchanges were completely immune from federal law liability. However, a court of appeals overturned Furman’s decision two years later.

The case is the City of Providence in Rhode Island et. al v BATS Global Markets Inc., U.S. District Court for the Southern District of New York, No. 14-02811.

from lawyers.buzz https://lawyers.buzz/exchanges-beat-high-frequency-trading-lawsuit/224/
via IFTTT