Judge Allen Goldberg ruled in favour of Putnam on all counts and went against a jury recommendation in December that he engaged in "usurpation of corporate opportunities" when he took business from a partnership he shared with Lozman to a new firm, Terra Nova Trading.

The alleged misconduct took place in the mid-1990s, before Putnam founded the Archipelago electronic communications network. Lozman claimed that electronic trading software he helped to develop was used at Terra Nova and ultimately became the foundation for the launch of Archipelago.

The jury valued the loss at $2.5 million, but Goldberg has ruled that Putnam was not liable.

In a statement, Putnam says: "I am pleased to have been vindicated by the court's decision and happy that this matter has been successfully resolved."

Lozman told reporters that he planned to appeal against the decision, saying he had lost the battle but the war is not over.

Putnam still faces a lawsuit brought by Lewis Borsellino, another former business partner. Borsellino, who set up a company called Chicago Trading and Arbitrage with Putnam, is suing him for allegedly diverting customers from the partnership to a business that was to become Archipelago.

The latest ruling came as Archipelago reported an 83% fall in second-quarter earnings, partly due to expenses related to its pending merger with the New York Stock Exchange.

The company says it incurred more than $8 million in costs associated with the merger and a $7 million increase in spending on advertising in the quarter. Q2 earnings fell to $3m from $17.3m a year earlier, even though revenue was flat at $127.8 million.

Commenting on the results, Putnam says the related merger expenses "were key factors in our net income decline for the quarter".

The Nyse's $4bn merger with Archipelago, which was announced in April, is still to be approved by company shareholders, Nyse seatholders and the US Securities and Exchange Commission.