NYSE accused of withholding info in HFT market manipulation lawsuit
A landmark securities class action case involving allegations of market manipulation via high frequency trading (HFT) continues at the New York Southern District Court. The new point of disagreement in this case, which targets major US stock exchanges, concerns a list of documents that the New York Stock Exchange (NYSE) has designated as privileged.
On February 18, 2021, the plaintiffs in this case challenged NYSE’s privilege log. In particular, the plaintiffs challenge 244 documents on the privilege log. These are documents where no lawyer is included in the communication, or, in one instance, where one lawyer was copied among a large group of recipients.
According to the plaintiffs, this privilege dispute is critical because the documents in question relate to upcoming witness depositions and because many of the documents likely implicate SEC preclusion.
The NYSE privilege log contains a total of 11,085 entries, spanning an 11-year time period from 2008 to 2019. NYSE says that virtually all of the challenged log entries involve lawyers. The Exchange agreed to de-designate and produce nearly a dozen of the plaintiff’s challenged communications. But it also made clear that it stood by all remaining designations. Likewise, the plaintiffs stated that they were standing by their challenges.
The plaintiffs ask the Court to review the contested documents and determine whether NYSE’s designations are correct.
The plaintiffs are aware that interrogating NYSE’s privilege logs could become a time-intensive exercise. Nevertheless, “because NYSE has withheld hundreds of facially relevant communications with no lawyer included in the “to/from/cc” fields, and because these documents appear to relate to on-going (and upcoming) witness depositions, as well as the issue of SEC preclusion, and because NYSE has conceded that some of its designations were overbroad, Plaintiff has raised plausible grounds for in camera review of the log entries”.
Let’s recall that this lawsuit was filed 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 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.