Flash Boys-Style Lawsuits Trending in US Securities Class Actions

The most intriguing trend within a slew of US class actions involving securities centres on high frequency trading, and allegations related to the practices featured in Michael Lewis's Flash Boys, according to a report by Cornerstone Research and Stanford Law School.

Professor Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse, said: "These lawsuits are very much in the early stages, and raise issues with a degree of economic complexity that far surpass the challenges encountered in the typical class action securities fraud case as we know it."

The suit against BATs Global Markets and others, filed in April this year in the Southern District Court of New York, is the first of several class actions related to high frequency trading (HFT). Defendants in the lawsuit include firms that specialise in HFT as well as numerous US securities exchanges and brokerage firms.

The plaintiffs comprise a large class defined in the complaint as "all investors who purchased and/or sold share in stock on a US-based exchange or alternative trading venue". In addition to alleging violations of US federal securities laws, claims have been made in other jurisdictions against the defendants of the lawsuit, noted the report.

The implication made by Cornerstone is that such class actions will involve all manner of brokerages, trading platform and exchanges, and, by the very nature of HFT, hugely increase the complexity of these lawsuits.

Overall, the number of securities lawsuits filed (78) marked a fall from the 91 filed in the first half of 2013.

In addition to the drop in number, the securities class actions filed in the first half of 2014 represent the lowest semi-annual amount in terms of market capitalisation for 16 years, thanks to an absence of mega-filings, according to the report.