NYSE responds to allegations in HFT case

Maria Nikolova

NYSE is among the Exchanges accused of selling certain services to high-frequency trading firms, which then used those services to engage in allegedly manipulative trading schemes at the plaintiffs’ expense.

Less than a fortnight after Judge Jesse M. Furman of the New York Sourhern District Court dashed an attempt by major US stock exchanges to dismiss a market manipulation case against them, New York Stock Exchange LLC, NYSE Arca, Inc., and Chicago Stock Exchange, Inc. (collectively, “NYSE”) filed their response to the allegations against them.

The plaintiffs – several investment funds – bring claims against several stock exchanges, including NYSE, under Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b). In brief, the plaintiffs allege that the Exchanges sold certain services to high-frequency trading (HFT) firms, which then used those services to engage in allegedly manipulative trading schemes at the plaintiffs’ expense.

In a document filed on July 25, 2019, and seen by FinanceFeeds, NYSE outlines 21 affirmative defenses in response to the plaintiffs’ complaint.

According to NYSE, the paintiffs fail to state a claim upon which relief may be granted against the Exchange.

Further, NYSE argues that the plaintiffs’ claims are barred, in whole or in part, by the applicable statute of limitations and repose.

Also, according to NYSE, the plaintiffs’ claims are barred, in whole or in part, to the extent they failed to take steps to mitigate their alleged damages, including that the plaintiffs continued to trade on the Exchanges’ markets after allegedly learning of the supposed manipulation.

NYSE also argues that the plaintiffs’ claims are barred because NYSE is absolutely immune from private damages suits, such as this one, challenging conduct that is undertaken in connection with the discharge of its regulatory responsibilities as a self-regulatory organization under the Exchange Act.

Moreover, NYSE is informed and believes, and on that basis alleges, that if and to the extent that its descriptions of the challenged products and services are determined to have contained false or misleading statements (which NYSE denies), the plaintiffs either knew or should have known about the matters alleged in the Second Consolidated and Amended Complaint, and their own negligence or other fault proximately contributed to the injuries allegedly suffered by Plaintiffs from the purchase and sale of stocks on NYSE exchanges, and bars any recovery to the extent thereof.

NYSE expressly denies that it engaged in any unlawful conduct and states that all or part of the damages alleged in the Second Consolidated and Amended Complaint, if they occurred, were caused by independent, intervening, and/or superseding events beyond NYSE’s control and unrelated to NYSE’s conduct, and/or by the policies, practices, acts, or omissions of independent persons or entities for whose conduct NYSE is not legally responsible.

The plaintiffs’ alleged damages, if any, are therefore not recoverable from NYSE, the Exchange says. In the alternative, any damages that Plaintiffs might be entitled to recover against NYSE, if any, must be reduced to the extent that such damages are attributable to the intervening acts and/or omissions of persons or entities other than NYSE.

NYSE also says that the plaintiffs’ claims against NYSE are barred in whole or in part by their own actions, omissions, and/or negligence.

NYSE denies liability and requests judgment dismissing the Second Consolidated Amended Complaint with prejudice and awarding NYSE its costs of suit, including attorneys’ fees, incurred in defending this action.

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