By Jonathan Stempel
NEW YORK, Nov 4 (Reuters) - Major U.S. stock exchanges haveasked a federal judge to dismiss a lawsuit accusing them ofcosting ordinary investors billions of dollars by riggingmarkets to benefit high-frequency traders.
Exchanges including Nasdaq, IntercontinentalExchange Inc's New York Stock Exchange, Bats GlobalMarkets and CHX Holdings Inc's Chicago Stock Exchange said theydeserve "absolute immunity" because they regulate themselves,and that only the U.S. Securities and Exchange Commission couldreview the plaintiffs' claims.
A co-defendant, Barclays Plc, said the plaintiffsfailed to show it intended to fraudulently conceal the use byhigh-frequency traders of its Barclays LX platform, sometimescalled a "dark pool," or that this use caused trading losses.
Andrew Brown, a partner at Robbins Geller Rudman & Dowdrepresenting plaintiffs led by the city of Providence, RhodeIsland and four pension funds, did not immediately respond onTuesday to request for comment.
The dismissal requests were filed late Monday in the U.S.District Court in Manhattan.
They came amid increased scrutiny for high-frequency tradingfirms, which use computer algorithms to gain split-secondtrading advantages.
On Oct. 16, the SEC brought its first market manipulationcase against such a firm, fining New York-based Athena CapitalResearch $1 million for using the algorithm "Gravy" to send ablizzard of trades just before the market close.
Athena did not admit wrongdoing. Michael Lewis, in hisbest-seller "Flash Boys: A Wall Street Revolt" published inMarch, accused high-frequency trading firms of rigging markets.The firms account for more than half of U.S. stock markettrades.
In the Manhattan lawsuit, exchange operators and Barclayswere accused of giving high-frequency traders special access toexchange floors and enhanced data feeds, and letting theminstall computer servers near the exchanges' own.
The plaintiffs said this created an "uneven playing field"that has since April 2009 diverted billions of dollars a yearfrom ordinary investors and led to "billions more" in kickbacks.They seek class-action status and unspecified damages.
In urging dismissal of the case, the exchange operators saidthe SEC had "expressly authorized" their dealings withhigh-frequency trading firms, even if it meant faster tradingspeeds.
They also called disseminating market data a "coreregulatory function" of exchanges that could not be challengedin court.
Barclays, meanwhile, said the plaintiffs based their claimson confidential marketing materials they never saw or relied on.
The British bank also accused the plaintiffs of "parrotingunproven assertions" made by New York Attorney General EricSchneiderman in June when he sued Barclays over its dark pool. Barclays has sought to dismiss that lawsuit.
The pension fund plaintiffs are located in Alexandria,Virginia; Boston; the Virgin Islands and Stockholm.
The case is City of Providence, Rhode Island et al v. BATSGlobal Markets Inc et al, U.S. District Court, Southern Districtof New York, No. 14-02811. (Reporting by Jonathan Stempel in New York; Editing by MeredithMazzilli)
Barclays (BARC)
