Too Fast, Too Frequent? High-Frequency Trading and Securities Class Actions
An individual investor calls his broker and requests $100,000 of a certain stock for his portfolio. The broker sees that shares of that stock are currently being offered at $10 a share, and that there are 4,000 shares available on the New York Stock Exchange (NYSE), 3,000 on NASDAQ, and 3,000 on the...
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| Published in | The University of Chicago law review Vol. 82; no. 3; pp. 1511 - 1557 |
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| Main Author | |
| Format | Journal Article |
| Language | English |
| Published |
Chicago
The University of Chicago Law School
01.07.2015
University of Chicago, acting on behalf of the University of Chicago Law Review |
| Subjects | |
| Online Access | Get full text |
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| Abstract | An individual investor calls his broker and requests $100,000 of a certain stock for his portfolio. The broker sees that shares of that stock are currently being offered at $10 a share, and that there are 4,000 shares available on the New York Stock Exchange (NYSE), 3,000 on NASDAQ, and 3,000 on the BATS Global Exchange, for a total of 10,000 shares. Satisfied with his ability to fulfill his client's request, the broker hits "submit"- only to find that these offerings have disappeared and that the cheapest offering price of the stock is now above $10 a share, resulting in a purchase of fewer than the expected 10,000 shares for his client. |
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| AbstractList | An individual investor calls his broker and requests $100,000 of a certain stock for his portfolio. The broker sees that shares of that stock are currently being offered at $10 a share, and that there are 4,000 shares available on the New York Stock Exchange (NYSE), 3,000 on NASDAQ, and 3,000 on the BATS Global Exchange, for a total of 10,000 shares. Satisfied with his ability to fulfill his client's request, the broker hits "submit"- only to find that these offerings have disappeared and that the cheapest offering price of the stock is now above $10 a share, resulting in a purchase of fewer than the expected 10,000 shares for his client. This Comment addresses the questions on high frequency trading (HFT) and securities class actions in three parts. Part I lays out the existing legal framework behind securities fraud class actions and the fraud-on-the-market presumption of reliance that has proven so vital to these class actions. Part II provides an overview of technical HFT strategies and mechanisms, discusses HFT's impact on market efficiency, and then evaluates current legal challenges to HFT. Finally, Part II explores the various strategies available to plaintiffs seeking to recover against HFT firms and argues for both a hybrid misrepresentation/manipulation theory of liability as well as further exploration of an open-market manipulation theory of liability. In addition, Part III addresses the possibility that investors using HFT strategies may seek access to the courts as plaintiffs and argues that procedural hurdles will pose unique difficulties if such suits are brought as class actions. |
| Author | Levens, Tara E. |
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| Snippet | An individual investor calls his broker and requests $100,000 of a certain stock for his portfolio. The broker sees that shares of that stock are currently... This Comment addresses the questions on high frequency trading (HFT) and securities class actions in three parts. Part I lays out the existing legal framework... |
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| SubjectTerms | Class action lawsuits Class actions (Civil procedure) Comments Defendants Efficient markets Finance Financial securities Fraud High frequency trading Investors Liability Market prices Misrepresentation New York Stock Exchange Plaintiffs Prices Securities Security prices Stockholders Stocks Studies |
| Title | Too Fast, Too Frequent? High-Frequency Trading and Securities Class Actions |
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