09 February 2016

CME Group sued over HFT sneak peek claims

14 April 2014  |  4330 views  |  1 CME Group Web Logo

CME Group is being sued by three users, accused of selling sneak peeks at order information to high-frequency traders.

In a complaint filed in a Chicago federal court, William Braman, Mark Mendelson and John Simms say the group perpetrated "a fraud on the marketplace".

The three former Chicago Board of Trade floor traders argue that in 2007 the CME and Cbot started letting HFT firms get early peeks at "at all orders to buy and sell futures contracts before they were reflected" to the rest of the market.

The suit argues that the exchange operator breached federal Commodity Exchange Act rules and is seeking unspecified money damages.

CME Group says it will fight the action. In a statement, the Exchange says: "The suit is devoid of any facts supporting the allegations and, even worse, demonstrates a fundamental misunderstanding of how our markets operate. It is sad when plaintiffs' lawyers bring a suit based on a desire for publicity, and in the rush to file a suit fail to undertake even the most basic effort to determine if there is any basis for their allegations. The case is without merit, and we intend to defend ourselves vigorously."

HFT has been in the news in recent weeks thanks to the publication of Michael Lewis's book on the subject, 'Flash Boys'. Tamara De Silva, a lawyer for the three men, told Bloomberg that although the suit was not inspired by the book, the men "felt vindicated" by it.

Tomorrow Members of the European Parliament will vote on rules to rein in high frequency traders through the introduction of circuit breakers, on-site algorithm testing and the harmonisation of tick sizes.

Comments: (1)

Neil Crammond - trader - london | 15 April, 2014, 10:38

CME along with Eurex and ICE have been very economical withe the facts over given data . I have written a few articles about this ; sadly regulators are unable to intervene as exchanges hide behind their RIE status . Sadly they are guilty of not providing "fair and orderly markets " but have so far managed to deny deny and deny . 

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