UPDATE 1-U.S. high-frequency trading case vs exchanges, Barclays is dismissed

(Adds details from decision, comments, background, casecitation, byline)

By Jonathan Stempel

NEW YORK, Aug 26 (Reuters) - Major U.S. stock exchanges andBarclays Plc on Wednesday won the dismissal ofnationwide litigation in which pension funds and other investorsaccused them of rigging markets at their expense to benefithigh-frequency traders.

U.S. District Judge Jesse Furman in Manhattan said federallaw afford exchanges "absolute immunity" from the plaintiffs'key claims, including over the creation of "complex order types"that can enable rapid trading, because of their status asself-regulatory organizations.

In a 51-page decision, Furman also said the plaintiffs didnot show they reasonably relied on Barclays' misrepresentationsabout the safety of its Barclays LX "dark pool," including thatthey were not at risk of being exploited by fast traders.

The lawsuit accused defendants including Barclays, Nasdaq, Intercontinental Exchange Inc's New York StockExchange, Bats Global Markets, CHX Holdings Inc's Chicago StockExchange and others of giving high-frequency traders favoredtreatment, costing less-favored investors billions of dollars.

Several regulators are also investigating dark pools, andNew York Attorney General Eric Schneiderman has sued Barclays.

High-frequency traders use computer algorithms to gainsplit-second trading advantages, and were accused of riggingmarkets in Michael Lewis' 2014 best-seller "Flash Boys."

Furman alluded to Lewis in explaining why it is for Congressand U.S. regulators such as the Department of Justice andSecurities and Exchange Commission to level the playing field,rather than let private plaintiffs do their work for them.

"Lewis and the critics of HFT may be right in arguing thatit serves no productive purpose and merely allows certaintraders to exploit technological inefficiencies in the marketsat the expense of other traders," he wrote. "They may also beright that there is a need for regulatory or other action fromthe SEC or entities such as the Exchanges and Barclays. Those,however, are debates and tasks for others."

Furman said one plaintiff, Great Pacific Securities, mayamend its lawsuit against Barclays if it wishes.

"We're disappointed that the judge thought the exchangesdeserved immunity as to complex order types," said PatrickCoughlin, a lawyer representing several pension fund plaintiffs."The way they were implemented disadvantaged our clients. Wewill review the opinion and determine whether to appeal."

Barclays had no immediate comment. BATS and IntercontinentalExchange declined to comment. The other defendants and a GreatPacific lawyer did not immediately respond to requests forcomment.

The case is In re: Barclays Liquidity Cross and HighFrequency Trading Litigation, U.S. District Court, SouthernDistrict of New York, No. 14-md-02589. (Reporting by Jonathan Stempel in New York; Editing by ChrisReese and Andrew Hay)