Frequently a point of contention for regulatory agencies, high-frequency trading has drawn ever more heat for its connection to potentially shady trading methods. Those concerns crystalized on April 11, when a group of investors filed a complaint against the world’s largest derivative trading firm, CME Group Inc. The filing accuses CME of selling market data to high frequency traders, giving them an unfair advantage.

The complaint, which was filed in Chicago, argues that CME has been giving high-frequency traders early access to buy and sell orders since 2007.  That practice, they argue, not only denied CME’s customers the priority they paid for, but gave high-frequency traders an unfair advantage. The complaint seeks class action status for CME’s clients.

“The defendants have perpetrated a fraud on the marketplace and intentionally concealed the activities of a select class of market participants from the rest of the defendants’ customers and marketplace users,” the complaint said.

CME has as denied any wrong doing. In a statement following the complaint, CME said that “the suit is devoid of any facts supporting the allegations and, even worse, demonstrates a fundamental misunderstanding of how our markets operate. It is sad when plaintiffs’ lawyers bring a suit based on a desire for publicity, and in the rush to file a suit fail to undertake even the most basic effort to determine if there is any basis for their allegations. The case is without merit, and we intend to defend ourselves vigorously.”

High-frequency trading practices use computer generated algorithms to input trade orders many times a second. While some argue that the practice improves the liquidity of markets, others say that allowing trades like this to go unregulated could cause damage to markets if left unchecked.


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