City of Providence, Rhode Island v. BATS Global Markets, Inc.

Updated: May 28, 2019

Status: Ongoing Case

Labaton Sucharow serves as co-lead counsel in a landmark securities class action case involving allegations of market manipulation via high frequency trading (HFT). The action was filed on behalf of investors that traded on a registered public stock exchange or a U.S.-based alternate trading venue, between April 18, 2009 and the present, and asserted claims against: (1) registered public stock exchanges located in the United States; (2) a class of brokerage firms; and (3) a class of HFT firms. 

The case alleges, among other things, that certain defendants permitted HFT firms, to purchase access to non-public investor order information, allowing them to profit at the expense of the class and to manipulate securities markets in violation of federal securities laws. 

Facing a dismissal in 2015, our team appealed and prevailed—essentially reviving the case in December 2017. A New York Federal Appeals Court panel, led by Senior Circuit Judge John Walker Jr., ruled that major U.S. stock exchanges catering to high-frequency firms do not have absolute immunity from any of the investor claims against them and remanded the case back to U.S. District Court. 

The appeals court also affirmed the district court’s ruling that it had subject matter jurisdiction over the case and struck down its holding that the plaintiffs had not sufficiently alleged the exchanges engaged in manipulative conduct. It further ruled, contrary to the holding by the district court, that such conduct constituted a primary violation of those laws, not a claim for aiding and abetting liability for which there is no private right of action.

After the Second Circuit denied the defendants petition for a panel rehearing on March 13, 2018, defendants filed a petition for a writ of certiorari to the United State Supreme Court. That petition was denied by the Court on October 9, 2018.

Following remand, defendants filed a new motion to dismiss, which the Southern District of New York denied on May 28, 2019, reasoning that Plaintiffs had successfully alleged standing, reliance, scienter, and loss causation.  Significant, the Court found that Plaintiffs' allegations raised a “cogent and compelling” inference that the defendant exchanges acted with scienter, where Plaintiffs alleged that (1) the exchanges developed a mix of products and services “for and at the behest of their preferred HFT customers,” knowing that they would permit the HFT firms to “manipulate prices and exploit Plaintiffs,” and (2) the exchanges “came to understand the exploitative potential of this mix of services,” and “began aligning their interests with those of the HFT firms, including enabling predatory HFT strategies.”

The case is City of Providence, Rhode Island v. Bats Global Markets, Inc., No. 14-cv-2811 (S.D.N.Y.). The lead plaintiffs are City of Providence, Boston Retirement System, Plumbers and Pipefitters National Pension Fund, and Employees’ Retirement System of the Government of the Virgin Islands. The defendants include seven public stock exchanges BATS Global Markets Inc., Chicago Stock Exchange Inc., Direct Edge ECN LLC, the Nasdaq Stock Market LLC, Nasdaq OMX BX Inc., New York Stock Exchange LLC, and NYSE Arca Inc.

Case Materials

Appeals Court Opinion