High-Frequency Trading Litigation in 2015: Explored
Overview:
Over the past few years, regulators have focused on High Frequency Trading by financial firms. This trading increased following release of a purported exposé of trading firm's use of high-speed algorithms and information gathering. Some HFT strategies, such as passive market making, may increase overall liquidity in the market. The Joint CFTC-SEC Advisory Committee expressed concern over the volume of orders and cancellations of trades (spoofing). Charges of alleged fraud and securities violations were filed against numerous financial services and national securities exchanges. The US Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Bureau of Investigation (FBI) announced that they were actively investigating HFT practices. HFT will continue to create challenging analytical and legal issues considering the complexity and multi-party nature of trading, rapidly changing regulations, un-tested legal theories, and litigation.
In a two hour live webcast, a panel of thought leaders and practitioners assembled by The Knowledge Group will discuss the latest, significant issues surrounding High-Frequency Trading (HFT) Litigations.
Key issues include that will be covered in this course are:
- High-Frequency Trading
- Market Manipulation
- Insider Trading
- Order Flow Payments
- Demonstrating Liability
- Calculating Damages
- Federal and State Regulation
- Regulation NMS in Trading
Agenda:
Dr. Pavitra Kumar, Senior Associate
The Brattle Group
- Introductory overview – key areas of high frequency trading…economic considerations…assessing situations of litigation in high frequency trading situations
Key Areas of High-Frequency-Trading-Related Litigation and Related Economic Issues
- Exchange-related Litigation:
- Pertains to trading venues’ violation of stated rules and practices (Section 19):
- Failure to adopt and present rules according to stated practice
- Failure to comply with stated rules
- Discussion of how financial economists may be able to assess materiality of disclosures and other customer representations
- Pertains to trading venues’ violation of stated rules and practices (Section 19):
- Litigation against HFT Firms:
- Relates to market manipulation and disruptive trading practices
- Discussion of how financial economists would evaluate reasons for engaging in these practices
- Market Access Litigation:
- Refers to the failure of broker-dealers to adopt adequate risk controls before providing customers access to markets
- Summary of key cases and trends in this area
Paul Hinton, Principal
The Brattle Group
- Use of trade execution performance measures to evaluate performance to help investors avoid abuses
- Any reliance of alleged forces of fraud in current litigation
- Common reaction to recent Law Review article that argues commodities exchange act offers protection to investors
Lauren J. Schreur, Attorney
Finn Dixon & Herling LLP
- Focus on FINRA’s increased focus on HFT/Algo trading supervision and controls
- FINRA Exam Priorities for 2014 and 2015 – may see FINRA enforcement actions coming out of these, abusive algorithms part of focus, but interest much broader
- Including a focus on Market Access controls
- Important for broker-dealers with HFT clients
- Including supervision and governance surrounding a firm’s trading technology and change management
- E.g. June 25, 2014 Settlement with Citadel Securities LLC; March 28, 2014 Settlement with Cutler Group, LP.
- Including a focus on Market Access controls
- Impending registration regime – The FINRA Board authorized FINRA to issue a Regulatory Notice seeking comment on a proposal to establish a registration requirement for associated persons who are: (1) primarily responsible for the design, development or for directing the significant modification of an algorithmic strategy; or (2) responsible for supervising such functions
- The FINRA Board also authorized FINRA to publish a Regulatory Notice reminding firms of their existing supervisory obligations with regard to the development and deployment of algorithmic trading strategies.
- FINRA Exam Priorities for 2014 and 2015 – may see FINRA enforcement actions coming out of these, abusive algorithms part of focus, but interest much broader
- SEC planning new regulations to increase oversight of HFT firms
- Require high-frequency traders to register as broker dealers
- Establish an “anti-disruptive trading rule” that could restrict high-frequency traders from executing short-term strategies
- Require firms to improve their management of trading algorithms and enhance regulatory oversight of their use
Who Should Attend:
- Attorneys
- Marketing Officers
- Marketing Professionals
- Marketing/Sales Executive
- Marketing Directors
- Risk and Compliance Managers
- Senior Counsel
- Fraud Monitoring
- Other Related/Interested Professionals
Dr. Pavitra Kumar is a Senior Associate at The Brattle Group with expertise in corporate finance issues including business valuation, …
Paul Hinton is a Principal of The Brattle Group located in New York City. He is a member of the …
Ms. Schreur’s practice focuses on securities litigation and broker-dealer inquiry and enforcement proceedings by the SEC and FINRA. She also …
Course Level:
Intermediate
Advance Preparation:
Print and review course materials
Method of Presentation:
On-demand Webcast (CLE)
Prerequisite:
NONE
Course Code:
145043
NASBA Field of Study:
Business Law
NY Category of CLE Credit:
Law Practice Management
Total Credits:
2.0 CLE
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SPEAKERS' FIRMS:
About The Brattle Group
The Brattle Group provides consulting and expert testimony in economics, finance, and regulation to corporations, law firms, and governments around the world. We aim for the highest level of client service and quality in our industry. We are distinguished by our credibility and the clarity of our insights, which arise from the stature of our experts, affiliations with leading international academics and industry specialists, and thoughtful, timely, and transparent work. Our clients value our commitment to providing clear, independent results that withstand critical review.
Economists at The Brattle Group have experience in investigations, litigation, and enforcement actions involving the analysis of algorithmic trading strategies, alleged disruptive practices, and manipulation claims related to a variety of instruments in securities and commodities markets. Our experts also have experience working with “big data,” and our terabyte-scale data storage solutions provide for massive parallel processing, which is often required for the effective analysis of dark pool and high-frequency trading activity.
Website: https://brattle.com/
About Finn Dixon & Herling LLP
Finn Dixon & Herling was founded in 1987. For the eleventh consecutive year, Finn Dixon & Herling is ranked in Chambers and Partners' top tier. The Firm continues to be the only firm designated by Chambers to its top tier, “Band 1”, for Corporate/M&A law firms in Connecticut.
Website: https://www.fdh.com/