In 1994 a lawyer did what most thought was impossible: he took on big tobacco on behalf of the state of Mississippi and won a record $368.5 billion judgment paid out by the 13 biggest tobacco companies to cover the cost of treating illnesses related to smoking. 20 years later he is trying the impossible again, this time launching a class action lawsuit against High Frequency Traders, and specifically 13 stock exchanges and subsidiaries on behalf of Harold Lanier "individually, and on behalf of all others similarly situated". Ironically, the lawyer behind the lawsuit is also named Michael Lewis, no relation to the famous author whose book simplifying just how rigged the market has become as a result of HFT (and of course the Fed, but that is the topic of the forthcoming "Liberty 33 Boys").
This case is about broken promises. Plaintiff Harold Lanier, and other Subscribers, (collectively “Subscribers”) entered into Contracts with the defendants, all of which are securities exchanges (“Exchange Defendants”), to receive electronic market data services offered by the Exchange Defendants. The Exchange Defendants promised to be fair by: (1) providing the market data service in a non-discriminatory manner; and (2) providing the Subscribers with “valid” data (i.e. the actual data that is accurate and not stale). The Exchange Defendants did not live up to either promise.
First, the Exchange Defendants failed to live up to their promise to provide Subscribers with the market data in a non-discriminatory manner. In an effort to increase their profits, the Exchange Defendants entered into lucrative side deals with certain customers to whom the Exchange Defendants sold advance access to the market data that Subscribers had contracted for through (1) direct feeds (“Private Feeds”) and (2) co-location services (“Preferred Data
Customers”). As detailed in Section IV.C. of this Complaint, for a price, the Exchange Defendants provided access to the data to Preferred Data Customers through arrangements that guaranteed they would receive the data substantially in advance of the Subscribers.
Unbeknownst to Subscribers, these side deals resulted in Subscribers receiving data that was obsolete because the Preferred Data Customers had advance access to the data.
Second, the Exchange Defendants failed to live up to their promise to provide Subscribers with valid data. The validity of the data is what made the electronic data services offered by the Exchange Defendants valuable to the Subscribers. But by entering into the side deals with the Preferred Data Customers, the Exchange Defendants effectively provided to Preferred Data Customers the data that Subscribers had paid for, while giving Subscribers data that was stale. In other words, as a result of the side deals, the Exchange Defendants deprived the Subscribers of the fundamental benefit of their Contracts, i.e. fair access to valid data. Plaintiff and the other Subscribers thereby suffered injury and damage as a result of the Exchange Defendants’ conduct.
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This Complaint alleges ordinary state law claims, the crux of which revolve around the sale of stale data to Plaintiff. In other words, the gravamen of Plaintiff’s Complaint is that the services he purchased from the Exchange Defendants (specifically, the data provided through the exchanges) were not delivered as promised. This Complaint does not involve any claims regarding the purchase or sale of securities or investors’ losses, nor does Plaintiff seek any relief related to the purchase or sale of any security.
And an interesting excerpt from the lawsuit framing the concept that is the crux of the issue: time.
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