NEW YORK, April 18 Dozens of the largest U.S.
stock exchanges, brokerages and high-frequency trading firms
were hit with a class action lawsuit by the capital of the state
of Rhode Island, accusing them of manipulating the U.S.
The lawsuit was filed on Friday in Manhattan federal
district court, as the high-speed trading industry came under
greater scrutiny following the publication last month of author
Michael Lewis' book "Flash Boys: A Wall Street Revolt."
A number of regulators have said they are probing the
industry, including the Justice Department, Securities and
Exchange Commission and Commodities Futures Exchange Commission.
The proposed securities class action was brought by the city
of Providence, Rhode Island, on behalf of investors who bought
stock in the United States from April 2009 to present.
The lawsuit targets stock exchanges operated by BATS Global
Markets Inc, Chicago Board Options Exchange, NASDAQ OMX
Group Inc and Intercontinental Exchange's New
York Stock Exchange, accusing them of engaging in a fraud
designed to manipulate the markets.
The alleged fraud, carried out with several brokerage firms
and sophisticated high-frequency trading firms like Citadel,
resulted in the diversion of "billions of dollars annually from
buyers and sellers of securities to themselves," the lawsuit
The scheme allowed some market participants to get
non-public data that gave them an "informational advantage" to
manipulate the U.S. securities market, the lawsuit said.
Stock exchanges and brokerages that controlled alternate
trading venues, or "dark pools," received kickbacks in exchange
for giving high-frequency trading firms access to material
trading data, the complaint alleged.
The complaint alleged wrongful conduct including electronic
front-running, rebate arbitrage, spoofing and contemporaneous
"By employing the aforementioned devices, contrivances,
artifices and manipulations, defendants pursued a fraudulent
scheme and wrongful course of business that operated as a fraud
or deceit on public investors trading stocks on the U.S. stock
exchanges," the lawsuit said.
The brokerage defendants include a number of major financial
institutions including Bank of America Corp, JPMorgan
Chase & Co, Citigroup Inc and Morgan Stanley
Representatives for the various defendants either declined
to comment or did not respond to requests for comment.
The case is City of Providence, Rhode Island v. BATS Global
Markets Inc, et al, U.S. District Court, Southern District of
New York, No. 14-2811.
(Reporting by Nate Raymond in New York; Editing by Richard