Court allows NYSE not to disclose certain revenue info in HFT case
The New York Southern District Court has sided with NYSE that certain of its revenue spreadsheets should remain under seal in a high-frequency trading (HFT) lawsuit. The relevant order, seen by FX News Group, was signed by Judge Jesse M. Furman on February 23, 2022.
This lawsuit was filed back in 2014 on behalf of investors that traded on a registered public stock exchange or a U.S.-based alternate trading venue, between April 18, 2009 and the present, and asserted claims against: (1) registered public stock exchanges located in the United States; (2) a class of brokerage firms; and (3) a class of HFT firms. The lawsuit targets some of the biggest US stock exchanges, including NYSE, Nasdaq and Bats.
The plaintiffs claim, inter alia, that certain defendants allowed HFT firms to profit at the expense of the class and to manipulate securities markets in violation of federal securities laws.
The plaintiffs claim that the Exchanges violated Section 10(b) of the Exchange Act and Rule 10b-5 by offering proprietary data feeds, co-location services, and order types that the plaintiffs allege were used by HFT firms to gain an undisclosed advantage over other investors, including the plaintiffs.
The parties in this case have been arguing over unsealing certain exhibits that form part of the discovery in this lawsuit. Whereas the plaintiffs are seeking making hundreds of exhibits public, the defendants disagree.
In particular, according to the Exchanges, there are five NYSE-related exhibits, comprising two unique NYSE documents, that should remain under seal in their entirety. These documents show certain revenues NYSE earned between 2010 and 2019 from providing co-location services and proprietary data feeds to each of a set of identified customers.
NYSE says the exhibits are competitively sensitive because they contain confidential customer information and because they disclose revenue details that NYSE does not disclose in its public financial reporting and are incomplete (their disclosure would thus cause confusion to investors).
On February 23, 2022, the Court sided with NYSE regarding the documents revealing certain of the revenues of the Exchange.
Three of the filings are identical copies of a spreadsheet that shows revenues earned by Defendants New York Stock Exchange, LLC, NYSE Arca, Inc., and NYSE Chicago, Inc. from proprietary data feeds and co-location services between 2010 and 2019. The spreadsheet identifies the NYSE Defendants’ customers and shows annual revenue by product for each customer. Two additional filings are identical copies of a similar spreadsheet with revenues earned by the NYSE Defendants from these products between 2009 and 2019 separated out by customer.
The Court found that the privacy interests of innocent third parties, namely the NYSE Defendants’ customers, and the potential harm to the NYSE Defendants’ competitive standing outweigh the presumption of access afforded to these filings. The filings contain confidential customer information of a type that is commonly sealed.
Additionally, disclosure of these filings could cause “investor confusion,” and thereby harm the NYSE Defendants, as the revenue details contained in the spreadsheet are not disclosed in public financial reporting and are incomplete.