The following article originally appeared on S&P Intelligence
The largest U.S. exchange operators have petitioned the U.S. Supreme Court to take up a case questioning whether exchanges favorWall Street’s fastest traders.
Brought in the wake of Michael Lewis’ 2014 bookFlash Boys, the case hinges on whether exchanges sell and offer products and services that illegally favor high-frequency traders over slower institutional investors such as pension and retirement funds. Plaintiffs in the case include the city of Providence, R.I., and a group of pension and retirement funds.
The U.S. Court of Appeals for the Second Circuit revived the case in December 2017, two years after the case wasdismissedby a district court judge. The decision came as a blow to the exchange-owning defendants, which includeCboe Global Markets Inc.,Nasdaq Inc.and New York Stock Exchange ownerIntercontinental Exchange Inc.
Now the exchanges have asked the U.S. Supreme Court to review documents related to the 2017 decision in hopes that the court will take the case.
“The need for certiorari is especially urgent because of the Second Circuit’s outsized influence in securities law,” the exchanges wrote in their petition for a writ of certiorari. “The court should grant review and restore certainty and stability regarding these critical securities-law issues.”
If the Supreme Court takes the case, long-standing issues over stock exchange immunity and high-frequency trading would be catapulted onto a new stage. But whether the court will agree to hear the case remains unclear. The Supreme Court accepts between 100 and 150 out of the more than 7,000 cases it is asked to review each year.
“I don’t think [the odds are] that high,” said Michael Friedman, general counsel and chief compliance officer of electronic trading and technology companyTrillium Management LLC, in an interview.
