Direct Edge/BATS Global
Hagens Berman represents HFT whistleblower and market expert, Haim Bodek, in an SEC fraud whistleblower case that prompted the U.S. Securities and Exchange Commission to bring record-breaking fines against two exchanges formerly owned by Direct Edge Holdings (and since acquired by Bats Global Markets, the second-largest financial exchange in the country). The exchanges agreed to pay $14 million to settle charges that the exchanges failed to accurately and completely disclose how order types functioned on its exchanges and for selectively providing such information only to certain high-frequency trading firms.
Mr. Bodek, former head of Trading Machines LLC (following stints with Goldman Sachs, UBS and others), has blown the whistle on deceptive practices by certain high-frequency trading firms and financial exchanges catering to them. He has been featured in front page Wall Street Journal profiles and elsewhere for his whistleblowing.
The SEC Order finds that Direct Edge, an exchange that merged with Bats in late January 2014, failed to accurately describe order types used on the exchange. It also found that such information was selectively disclosed to certain high-frequency trading members and not to the SEC or the investing public.
This conduct violated sections 19(b) and 19(g) of the Securities Exchange Act of 1934.
The investigation centered on the controversial “price sliding” process for handling buy and sell orders. It revealed that the Exchange actually offered three variations of “price sliding” order types but did not disclose these features in its required disclosures to the SEC or to the investing public.
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