SEC says appeals court should take on pension fund lawsuit against exchanges

The SEC said a federal appellate court should consider an appeal of a lower-court ruling in a suit filed by investors, including three pension funds, that claimed exchanges favor high-frequency traders.

In an amicus brief requested by the U.S. Court of Appeals in New York, the Securities and Exchange Commission said the U.S. District Court has jurisdiction over the case filed by investors including the $5.3 billion Plumbers and Pipefitters National Pension Fund, Alexandria, Va.; $4 billion State-Boston Retirement System and the $1.1 billion U.S. Virgin Islands Government Employees' Retirement System, St. Thomas.

The plaintiffs, also including the city of Providence R.I., claimed that the New York Stock Exchange, Nasdaq and Bats Global Markets offered services to high-frequency traders that allowed them to use data faster than ordinary investors.

A U.S. District Court in New York in August 2015 ruled the exchanges were exempt from such lawsuits.

“The commission is of the view that the District Court had subject-matter jurisdiction over plaintiffs' private securities fraud action against the defendant exchanges, and that the defendants are not absolutely immune from suit for engaging in the challenged conduct,” the SEC said in the brief filed Monday.

The appeals court has not determined whether it will hear the case.