(Adds comments from CME, plaintiffs’ lawyer)
By Tom Polansek
CHICAGO Dec 3 A U.S. judge on Thursday dismissed a lawsuit accusing CME Group Inc, the world’s largest futures exchange operator, of favoring high-frequency traders by selling them access to market data ahead of other investors.
Three CME Group customers filed the lawsuit last year claiming that the Chicago-based company had created a marketplace fraught with manipulation and “surreptitious trading” by fast traders that caused the prices of futures contracts to be artificial.
The customers – William Braman, Mark Mendelson and John Simms – are considering their options after Judge John Robert Blakey in Chicago dismissed the case, said Victor Stewart, one of their lawyers.
“CME Group has maintained since this suit was filed that the case was without merit and is gratified that today the judge concluded that it should not proceed further,” company spokeswoman Laurie Bischel said.
High-frequency traders use computer algorithms to obtain split-second advantages when placing trades, and are responsible for more than half of all U.S. trading volume.
The U.S. Department of Justice and other federal and state investigators have probed the practice, which came under increased scrutiny last year with the publication of Michael Lewis’ book “Flash Boys: A Wall Street Revolt.”
Braman, Mendelson and Simms failed to allege that they had suffered actual losses on any specific transactions from CME Group’s policies toward high-frequency traders, Blakey said in an opinion. They also did not show that artificial prices existed at CME Group or that company executives had made false statements about market data, he said.
“This Court’s task is not to adjudicate the fairness or appropriateness of high-frequency trading,” Blakey said.
The three customers had alleged that CME Group and its Chicago Board of Trade unit gave high-frequency traders early access to buy and sell orders. They said this deprived other investors of the transparent, real-time market data that they were paying for and thought they were receiving.
The lawsuit had sought class-action status for customers in CME Group’s financial futures contracts, as well as agricultural, energy, metal, equity index, foreign exchange and interest rate futures and options contracts.
The case was Braman et al v CME Group Inc et al, U.S. District Court, Northern District of Illinois, No. 14-02646. (Reporting by Tom Polansek; Editing by Andrew Hay)