City of Providence, Rhode Island, et al. v. BATS Global Markets Inc. et al.

The judge granted summary judgment for our clients, citing Professor Hendershott’s expert reports throughout his opinion.

Retained by the Joint Defense Group Representing the Exchanges

In this alleged market manipulation class action, plaintiffs claimed that seven stock exchanges misled them about certain investment products and services sold to high-frequency trading (HFT) firms. Similar allegations have been popularized by books such as Flash Boys by Michael Lewis. Counsel for the joint defense retained Cornerstone Research to support Terrence Hendershott of the University of California, Berkeley, to evaluate the proposed theories of liability and alleged mechanisms of harm.

“This gap between [the plaintiffs’ expert’s] methods and conclusions is fatal to Plaintiffs’ arguments for admissibility.”

Professor Hendershott identified flaws in the plaintiffs’ methodology used to determine membership in the proposed class. Specifically, he opined that the plaintiffs’ class definition was arbitrary and did not correspond to their theories of liability and harm. He also demonstrated that individualized inquiry would be necessary to understand the extent of the putative class members’ knowledge of how HFT firms could use the products and services at issue.

Counsel for the joint defense also retained Cornerstone Research to support Arnold Barnett of the Massachusetts Institute of Technology. Professor Barnett found that the plaintiffs’ damages methodology was greatly limited from a statistical perspective and was not a reliable way to calculate alleged harm.

A judge for the U.S. District Court for the Southern District of New York granted summary judgment for the defendants. Citing Professor Hendershott’s expert reports throughout his opinion, the judge also granted the defendants’ motion to exclude testimony from the opposing expert.