United States v. Coscia as a Case of First Impression

On November 3rd, high-frequency trader Michael Coscia was found guilty in Chicago in one of the most-watched financial trials in recent years.[1] His conviction under Dodd-Frank’s new anti-spoofing provision is important on a number of levels: what it means for a number of other market manipulation investigations, its deterrence value going forward, and the failure of the void for vagueness challenge mounted by the defense. Coscia gives the imprimatur of the Federal courts to Dodd-Frank Section 747 as a tool to police the markets in the new financial world where “trades are not the basic unit of market information—the … Read more

HFT Class Action Defeats and the Challenge to Regulators

On August 27, 2015 Judge Jesse Furman of the Southern District of N.Y. dismissed plaintiffs’ claims in the consolidated high frequency trading (“HFT”) class action lawsuit In re Barclays Liquidity Cross and High Frequency Trading Litigation.[1] Coming after Judge Katherine Forrest’s similar order in Lanier v. BATS[2] in April, these dismissals likely spell the end of attempts of private plaintiffs to sue the exchanges over their alleged facilitation of abusive HFT activity.[3] The cases ran into two insurmountable barriers. The first is that many of the practices that the plaintiffs complained of were specifically approved by … Read more

Ethics, Cost-Benefit Analysis, and the HFT Debate

Last year’s best-seller by Michael Lewis, Flash Boys,[1] ignited a firestorm of debate on the subject of high-frequency trading, or HFT. Lewis’s central claim is that the stock markets are “rigged,” with HFT shops skimming sizable amounts off of trades by other, slower traders. The exchanges are allegedly in on the game, as they enable HFT through co-location, private data feeds, and the development of complex special order types, all in return for sizeable fees. Although SEC Chair Mary Jo White quickly rejected Lewis’s claim,[2] public debate continued and a number of lawsuits were filed against the exchanges and … Read more