Lawsuit against Lenexa-based BATS Global Markets challenges Wall Street as ‘rigged’ market

04/22/2014 9:14 PM

04/22/2014 9:14 PM

Author Michael Lewis’ indictment of high-frequency stock trading has found a voice in a lawsuit against Lenexa-based Bats Global Markets Inc., Kansas City-based Tradebot Systems Inc. and much of Wall Street.

The city of Providence, R.I., sued Bats and other U.S. stock exchanges as well as many brokerage firms and trading firms. The 41 companies’ “misconduct rigged the market and manipulated the prices at which shares were traded,” according to a copy of the petition provided by attorneys representing the city.

A Bats spokesman declined to comment on the lawsuit.

Tradebot is owned by Dave Cummings, founder of Bats, which is the nation’s second-largest stock exchange. He could not be reached. The suit also named the New York Stock Exchange and Nasdaq.

The petition seeks class action status, which would give it authority from the U.S. District Court in the Southern District of New York to represent any party harmed in the way that the city of Providence says it was harmed. It would cover those who have traded since April 18, 2009.

“It would be anybody that’s trading in the market,” said attorney Patrick Coughlin of Robbins Geller Rudman & Dowd LLP, “small investors as well as institutional investors.”

Its charges include claims that investors’ orders are being detected before they have been carried out, allowing some to trade ahead of the orders and profit. The practice is called front running and is illegal.

At times, the 57-page petition cites Lewis’ “Flash Boys: A Wall Street Revolt” in making its case. Lewis appeared recently on “60 Minutes” in a piece the show called “Rigged.”

For example, in explaining trading programs called algorithms that high-frequency traders use, the document said, “As Lewis explains in ‘Flash Boys,’ the HFT firms even ‘give these spoofing algos scary names like Ambush, Nighthawk, and Raider.’ ”

Coughlin said he had been looking into reports about Wall Street’s problems that have been “trickling out” for about two years.

“Providence took an interest in this when it hit the news,” he said.

The petition seeks unspecified damages, restitution and forfeiture as well as injunctions from the court that would relieve the harms.

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