It could be the financial markets version of David versus Goliath.
Exchange operator Nasdaq has filed in New Jersey Court a patent infringement lawsuit to protect its intellectual property against rival upstart IEX.
The lawsuit, according to both a Nasdaq release and spokesperson, seeks to halt the unauthorized use of Nasdaqs proprietary electronic trading platform.
Nasdaq said in its brief that the seven patents asserted in the lawsuit represent millions of dollars in investment over decades, and cover several industry-leading innovations. These patents contribute to the performance of Nasdaqs trading platforms related to closing auction processes, multi-parallel order processing, matching engine performance, and data feed optimizations. The lawsuit asserts IEX knowingly violated this series of Nasdaq patents in the development of its trading platform.
In addition to using our technology to power our markets, Nasdaq is a leading technology provider to other market operators across the world, said Edward Knight, Nasdaq General Counsel and Chief Regulatory Officer. These seven patents cover important innovations that we, and our customers, rely on for reliability, scalability, and transparency.
Nasdaq declined further comment.
an IEX spokespeople told Traders Magazine, “Similar to our exchange application process, this is yet another attempt by Nasdaq to obstruct an innovative new competitor.
As described in the lawsuit, IEX employs several former Nasdaq employees familiar with Nasdaq technologies who have been involved in the development of IEXs trading platform. IEX admitted in public filings that its closing auction process was designed based on extensive review of Nasdaqs patented process and that the information its system is designed to disseminate to the market during closing auctions is substantially similar to the Nasdaq Net Imbalance Order Indicator, one of the key features of patents asserted in the lawsuit.
The lawsuit seeks to stop, and obtain fair compensation for, IEXs unauthorized use of Nasdaq intellectual property.
The patent infringement lawsuit is Nasdaq v. IEX Group, Inc.