NYSE Named in $4 Bln Lawsuit Over Trading
Mon Jun 4, 2007 11:01 PM BST
NEW YORK (Reuters) - The parent of the New York Stock Exchange has been accused in a $4 billion lawsuit of providing prices through its electronic trading system that are inferior to those available to floor traders, giving the latter an unfair advantage.
Sea Carriers LP and affiliate Sea Carriers Corp., which brought the lawsuit, accuse NYSE Euronext (NYX.PA: Quote, Profile , Research) (NYX.N: Quote, Profile , Research) and specialists of colluding to disadvantage traders using the electronic SuperDOT system.
Among the many other defendants in the complaint are Bank of America Corp. (BAC.N: Quote, Profile , Research), Bear Stearns Cos. Inc. (BSC.N: Quote, Profile , Research), Goldman Sachs Group Inc. (GS.N: Quote, Profile , Research), LaBranche & Co. (LAB.N: Quote, Profile , Research) and Van der Moolen Holding NV (VDMN.AS: Quote, Profile , Research), which operate specialist firms that help conduct trading from the Big Board floor.
"Empirical evidence demonstrates that those who traded through the SuperDOT system got consistently worse executions than those who traded through floor brokers," according to the complaint filed with the U.S. district court in Manhattan.
"As a result of defendants' misconduct, the costs of purchasing and selling (securities) by public investors were artificially manipulated and distorted," the complaint added.
The Sea Carrier companies, based in Stamford, Connecticut, have traded billions of shares through SuperDOT, according to the complaint, which was filed on June 1.
NYSE Euronext spokesman Rich Adamonis and Bank of America spokeswoman Shirley Norton declined to comment.
Representatives for other defendants did not immediately return calls seeking comment.
CLASS ACTION STATUS SOUGHT
The lawsuit seeks class-action status for the period from Oct. 17, 1998 to the present and seeks triple damages because of alleged antitrust violations.
SuperDOT is a computerized order-routing system used by NYSE member firms to send market and limit orders directly to the specialists. It is intended for orders of fewer than 10,000 shares, according to the complaint.
The alleged collusion involved filling floor traders' orders first, letting floor traders see incoming SuperDOT orders, and routinely slowing SuperDOT orders placed when market conditions were favorable, the complaint said.
As an example, the plaintiffs set forth a series of trades it said were made in June 2003 showing much weaker-than-average execution results with SuperDOT than for the overall market.
"The likelihood of this timing bias being mere coincidence or statistically noise is zero," the complaint said.
The future of Big Board specialist traders and floor brokers has been questioned as trading migrates to electronic platforms.
Last month, however, NYSE Euronext Chief Executive John Thain said at the Reuters Exchanges and Trading Summit: "I think the floor will continue to exist ... partly because we gave them electronic tools so they can actually handle more order flow with fewer people." |
