Many large brokerages, high speed trading firms, and U.S. stock exchanges were named as defendants in a securities fraud class action lawsuit filed by Providence, Rhode Island on April 18, 2014. The Defendants in the high frequency trading securities fraud class action are accused of various types of conduct, including insider trading and manipulating trading within the U.S. securities markets. The manipulation is alleged to have been achieved via high frequency trading based upon access to market information not available to the general investing public and other illegal conduct.
A few of the defendants targeted in the lawsuit include NASDAQ Stock Market, LLC, New York Stock Exchange LLC, Chicago Board Options Exchange Inc., BATS Global Markets, Inc. stock exchanges, a number of large brokerage firms, including Citigroup, Inc., Goldman Sachs Group, Inc., Morgan Stanley & Co. LLC and a number of high speed trading firms or “Flash Trading” firms.
Investors who purchased stock in the United States are being represented in a securities fraud class action. The transactions at issue in the class complaint occurred from April of 2009 forward. The complaint alleges the Defendants’ actions resulted in billions of dollars in damages to the investor class. The securities fraud misconduct alleged against the class defendants includes: contemporaneous trading, front-running, spoofing, and rebate arbitrage. The lawsuit further explains that using certain devices and manipulations, the defendants were able to pursue false schemes and fraudulent courses of business that were intended to defraud investors who were trading securities.
Securities regulators, including the S.E.C., Justice Department and Commodities Exchange Commission are reviewing the high frequency trading industry independently of the Providence Class action filing last month.
The Providence high frequency trading class action and the ongoing regulator investigations into the high frequency trading industries potential for fraud and market manipulation will hopefully further uncover and bring to light trading and market practices by large market players that at best involve questionable conduct. Securities regulators should act quickly to investigate and protect the general investing public from any questionable or illegal conduct by the trading and investment industry.
With billions of dollars in losses alleged and allegations of billions of dollars in gains by the Defendants, can a Hollywood movie be far off? Stay tuned.