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According to Market Intelligence, April 2023

US federal judge denies exchanges' motion to toss high-frequency trading lawsuit

A dismissal motion from the biggest U.S. stock exchanges over a lawsuit related to high-frequency trading has been rejected by the same New York federal judge who threw out the claims in 2015.

On May 28, U.S. District Court Judge Jesse Furman denied the request to throw out a five-year-old lawsuit that alleges seven exchanges now owned by Intercontinental Exchange Inc., Nasdaq Inc. and Cboe Global Markets Inc. created an environment that illegally favored high-frequency traders with access to in-depth market data products, co-location services and complex order types that were not accessible or made readily available to other investors. The lawsuit was brought by plaintiffs including the city of Providence, R.I., and a handful of pension and retirement funds.

Within the ruling, Furman wrote that the plaintiffs' allegations have moved "across the line from conceivable to plausible."

The case, which is still in its preliminary stages, has been batted around the court system a handful of times since it was originally brought in 2014.

Furman dismissed the case in August 2015, writing that the claims against the defendants were insufficient to proceed and that the exchanges were immune from certain allegations over their market data feeds and complex order types. More than two years later, the U.S. Court of Appeals for the Second Circuit revived the lawsuit by vacating Furman's dismissal and remanding the case for further proceedings. Circuit Judge John Walker Jr. wrote in the opinion at the time that the appellate court had determined the plaintiffs had "sufficiently pled that the exchanges misled investors by artificially affecting market activity and that the district court erred in dismissing this action on that basis."

Spokespeople for the ICE-owned New York Stock Exchange, Nasdaq and Cboe all declined to comment about the decision.