Lawsuits against Barclays PLC and seven stock exchanges over claims that the exchanges and the bank’s dark pool favored high-frequency traders were dismissed Wednesday by a federal court judge.
The lawsuits were combined in multidistrict litigation that named as defendants Barclays, BATS Global Markets, Chicago Stock Exchange, Direct Edge ECN, Nasdaq Stock Market, Nasdaq OMX BX, New York Stock Exchange and NYSE Arca, according to court documents.
The lawsuits stemmed from the 2014 book by Michael Lewis, “Flash Boys: A Wall Street Revolt,” which claimed that said stock exchanges and dark pools allowed high-frequency traders to get and trade on information faster than other traders.
In dismissing the claims, U.S. District Judge Jesse M. Furman in New York said that Barclays’ and the exchanges’ actions were not manipulative, that exchanges are “absolutely immune” from legal action as a result of “the quasi-governmental powers delegated to then-exchanges” and that the venues fall under the regulatory authority of the Securities and Exchange Commission.
“Lewis’ book may well highlight inequities in the structure of the nation’s financial system and the desirability for, or necessity of, reform,” Mr. Furman said in his ruling. “For the most part, however, those questions are not for the courts, but for commentators, private and semi-public entities (including the stock exchanges), and the political branches of government, which — as plaintiffs themselves observe — have already taken up the issue.”
A separate lawsuit against Barclays, filed in June 2014 by New York Attorney General Eric Schneiderman, remains pending in New York State Supreme Court. That suit alleged Barclays increased the market share of its dark pool through false statements to clients and investors about how, and for whose benefit, the bank operates its dark pool.