Ms. Sue Goll

Futures traders Sue CME

Now that both the FBI and the DOJ have woken up from a half-decade slumber realizing there was riggedness, RIGGEDNESS going on in these here stock markets courtesy of Michael Lewis' book, it wasn't long before those most impacted by the frontrunning strategies of HFTs spoke up - anyone who has lost money in the stock market since Reg NMS was conceived.

Of course, said loss could have been the loss of many other factors - such as the market being rigged by the Fed as opposed to vacuum tubes - but since nobody really know much if anything about how HFTs operate, it is rather convenient to scapegoat anything and everything that ever went wrong with one's P&L on algorithms.

Sure enough, in a lawsuit that was just filed by lead plaintiff William Charles Braman, seeking class-action status, and filed on behalf of all users of real-time futures market data and futures contracts listed on the CBOT and CME from 2007 to now, the CME is allegd to have sold order information to high-frequency traders ahead of other market participants.

Specifically, from the lawsuit:

Throughout the Class Period, Defendants not only permitted the HFTs to see price and market data, including open orders, market orders before all other market participants and trader saw the price and market data, they permitted the HFTs to execute trades using this same non public data and order information before all other traders and market participants. In so doing, the Defendants engaged in a fraud on the marketplace, deceptive practice and failed to maintain a marketplace that is free from market disruption and market manipulation.

Throughout the Class Period, the Defendants concealed the fact that they were not providing a marketplace free of market manipulation because they were allowing the HFTs to trade based upon non-public information, specifically, the non-published and unexecuted orders of all other users of the CME and CBOT. In so doing, the Defendants failed to provide a marketplace that is free from market manipulation and established an unequal and two-tiered marketplace all the while inviting and soliciting the use of its financial trading instruments for profit.

Well, duh. Apparently it took the general public a Michael Lewis book to reread in which we showed that an estimated over 30% of CME revenues were made from HFT - in other words from selling proprietary data in direct feeds to high-paying subscribers, that hits collocated servers ahead of the consolidated tape.

But the punchline is that this is not illegal per se. Why? Because the regulators, in all their corrupted and captured brilliance, allowed it!

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