NYSE Named in $4 Billion Lawsuit Over Unfair Trading
The parent of the New York Stock Exchange has been accused in a $4 billion lawsuit of providing worse prices on trades executed through its electronic SuperDOT system than those handled by floor traders.
Among the many other defendants in the June 1 complaint are Bank of America, Bear Stearns, Goldman Sachs, LaBranche & Co. and Van der Moolen Holding NV, which operate specialist firms that help conduct trading from the Big Board floor.
Sea Carriers LP and its affiliate Sea Carriers Corp., which brought the suit, are based in Stamford, Connecticut, and have traded billions of shares through SuperDOT, according to the complaint. They accused NYSE Euronext and specialists of colluding to favor floor traders.
"Empirical evidence demonstrates that those who traded through the SuperDOT system got consistently worse executions than those who traded through floor brokers," according to the complaint filed with the U.S. district court in Manhattan.
"As a result of defendants' misconduct, the costs of purchasing and selling (securities) by public investors were artificially manipulated and distorted," the complaint added.
NYSE Euronext spokesman Rich Adamonis and Bank of America spokeswoman Shirley Norton declined to comment. Representatives for other defendants did not immediately return calls seeking comment.
The lawsuit seeks class-action status for the period from Oct. 17, 1998 to the present and seeks triple damages because of alleged antitrust violations.
SuperDOT is an computerized order-routing system used by NYSE member firms to send market and limit orders directly to the specialists. It is intended for orders of fewer than 10,000 shares, according to the complaint.
The alleged collusion involved filling floor traders' orders first, letting floor traders see incoming SuperDOT orders, and routinely slowing SuperDOT orders placed when market conditions were favorable, the complaint said.
The future of Big Board specialist traders and floor brokers has been questioned as trading migrates to electronic platforms.
Last month, NYSE Euronext Chief Executive John Thain said at the Reuters Exchanges and Trading Summit: "I think the floor will continue to exist ... partly because we gave them electronic tools so they can actually handle more order flow with fewer people."