Chicago-based CME Group Inc, which operates the world’s biggest derivatives exchange, has been sued by traders who accuse it of vending crucial market data to high frequency traders, depriving other participants who couldn’t access it.
In the case, which was filed on Friday with the U.S. District Court in Chicago, John Simms, Mark Mendelson and William Braman accuse the CME and its Chicago Board of Trade division of having allowed high-frequency traders early contact to buy and sell orders. They say this denied other traders real-time and transparent information on interest rate contracts and futures.
“The defendants have perpetrated a fraud on the marketplace and intentionally concealed the activities of a select class of market participants from the rest of the defendants’ customers and marketplace users,” the lawsuit stated, according to Reuters.
However, CME insists that it had done no wrong. It stated that the Friday’s case was”devoid of any facts supporting the allegations and, even worse, demonstrates a fundamental misunderstanding of how our markets operate.” It further said that “the case is without merit, and we intend to defend ourselves vigorously.”
High-frequency trading involves using computers to determine split-second advantages before placing orders, and accounts for over half the U.S. trading figures. Its supporters have long argued that it creates market liquidity, while its opponents say it risks destabilizing markets and cover rigging.
The practice is currently being investigated by federal and state authorities as well as the U.S. Department of Justice.
The case seeks monetary damages and an end to the claimed favouritism for clients in metal, energy, agricultural, interest rate, and foreign exchange and equity index futures as well as in financial futures contracts.
The lawsuit is Braman et al v CME Group Inc et al, U.S. District Court, Northern District of Illinois, No. 14-02646. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Yashu Gola at email@example.com