Faculty Notes Ronald J. Colombo, Professor of Law

Published on September 4, 2015 | by LawNews

Prof. Ronald Colombo Quoted in Law360 Story on Flash Crash Lawsuit

‘Flash Boys’ Suits Lose Luster After Exchange Case Tossed
By Ed Beeson
August 27, 2015


The prospects of “Flash Boys”-inspired litigation dimmed Wednesday when a New York federal judge ruled that stock exchanges have immunity from private suits claiming they helped high-frequency traders gain an unfair advantage in the marketplace, experts say.

In addition to public debate and government probes, the 2014 Michael Lewis expose about high-frequency trading has sparked a number of investor lawsuits accusing Wall Street giants of helping to rig the markets in favor of computerized, algorithmic traders that make money off being the fastest to the draw.

But with U.S. District Court Judge Jesse Furman ruling unequivocally that entities like the New York Stock Exchange and Bats Global Markets enjoy broad immunity from such suits, it sent a signal that could not only chill future litigation but also make it hard to continue claims against other market participants, such as the trading firms themselves.

Even if exchange immunity were not an issue, Judge Furman continued, the plaintiffs’ claims against the venues would still fail because they don’t allege a primary violation of federal securities laws.

Instead, by alleging that exchanges helped high-frequency traders rig the markets, they are merely asserting an aiding and abetting claim against them. There is no liability under the Exchange Act for aiding and abetting a manipulative scheme, he wrote. …

“This shows you once again how devastating it is for plaintiffs to not have the right to sue those who are aiding and abetting securities law violations,” Ron Colombo, a professor at Hofstra University School of Law, said.

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