under the securities laws just to court however found that it was most plausible that the calculation calculation did not realize that the numbers they were coming to the market are false and on a motion to dismiss granted grant the motion dismissed and dismissed the client entirely now we respectfully disagree with the district court and think it's far more plausible manipulation security trading volume of four hundred and sixty dollars times normal the price was plummeting and then suddenly you know a pitch for those for an hour and nobody noticed is what they're claiming so yes to the simple press that's the simple fact that our froze  basis for the inference that the game is actually being watched and of course in one sense i understand that the price is important to a lot of people at the same time the price is supposed to be updated every fifteen seconds which says to me that that must be an automated process not something that someone's manually doing and so why why is it clear that the calculation agents are monitoring the  ely a presumably and maybe you can tell me i'm wrong that it's presumably the automated changes or none changes in the price well your honor we don't know for sure whether it's automated  then entering that price i gree was likely automated i just don't know for certain song think it might have been someone doing something it just beyond the four corners of the complaint i just don't know but i agree that it was likely to be automated now  disruption events so i don't know you know you know we haven't there's been no discover in this case i don't know what sort of they have an alarm that goes off to they have some computer programs that detect when the price is off they have someone there to check i don't know how they're supposed to detect market disruption events but that's that's part of what they do they have the discretion to declare a market disruption event and also they're publishing its prices yes it is the formula but you know one would hope that they have some sort of mechanism for making sure they're accurate when they send the entire market vienna's back there are certain things i don't know but you know if a price is frozen for an hour you know whether it be you know  a market price for some stock whether the automate or not there should be some mechanism someone watching whether it be a robot watching or a computer program or a person to say hey this is wrong and we also allege that at the same i mean want not admittedly not the same corporate entity another division of credit suisse was trading an enormous amount of the vix futures contracts that were underlying i think correct price that were driving the price t o price of these of these securities so you know credits with the calculation agent you know under you know c s i and then it's trading arm was trading a quarter of the market at the exact same time  most plausible explanation that no one noticed are you suggesting i don't know exactly what i don't hold with the complaint actually says in this area that the division the trading the vision of buying heavily would also have been paying attention to the was trying to drive the price down but also selling securities into the secondary market so you know there is a reason for them to do to them to to not tell about the about the price  manipulation claim this is judge lynch i mean in other words that's a false and misleading statement to the extent that this was all a scheme from the start but if it's not a scheme from the start to have all of this happen metra understand the basis for saying the that credit suisse actually knew what the effect was going to be it seems to me they couldn't tell what the effect was going to be this whole thing would have turned out very differently if the where they wouldn't predict that it was certain that this would happen they'd survived through two other such episodes without this kind of crash happening so why isn't it enough that they said what they said which is basically we put a skull and crossbones on the front of this we tell you that we're in a conflict of interest position with you we tell you these are highly speculative notes we tell you that you shouldn't count on the fact that our hedging isn't going to have an impact on the price it seems to me the only way that you can succeed and i'm going to be interested to hear your argument on the manipulation front  is by establishing that they knew this was going to happen because they planned it to happen and wanted it to happen yes your honor and this scheme and the section eleven claims are interrelated as you as you discussed and i think what you're getting at here is kind of actually the heart of where the district court made an error that is the court said that hey you know credit suisse didn't know what was going to happen markets are opposed to just you know falling with the mark you know just taking opera you know i can opportunistically as the market developed but i think but you know with all due respect to this a court that's not what we allege that's not economically correct that it was a to stickley certain that you know with that eventually the price effects would spike so it's like the way i knowledge i your side supportive of your your position that they knew that it was going to spike again they've had three prior incidents and i think the complaint alleges that they were there were considerable spikes  announcement in which they were increasing their hedging ability because they were afraid that they would not be able to properly hedge if if there was another spike is that is that is that what your theory is yes better than i would suisse to some extent not for the v i x is but but but but but but for the x i v s in other words when to buy when to sell they they can decide when they want to buy it back with it with acceleration of that or just on their own his desires so it's not like a normal market and the nd question i have is that when you're talking about this kind of situation this is not normal other observation here is i don't understand why the issue and this would be for the other side why did you see the sixty million x i b notes in january i just don't understand why they would do that  while they while they say you know that this market is somewhat controlled because they issue it they can call it sixteen point seven five shares means that in a spike they have to hedge those which is means they have to hedge sixteen million seven thousand more shares and the put three previous spikes when it went thirty percent forty percent but the price still survived now you're putting you know double or triple or quadruple the pressure on the underlying vix futures because you have to purchase that much more ahead so that's what they were doing they knew that by selling this massive amount of new securities they would be stabilized their process their product the x i v would now bigger sensually then the then the they're in balancing the market in a way they know that the next bike the the products going to die that's what the sale of the securities did they knew that was going to happen when they get to the securities and that is a material misleading statement is explained in the record as far as i know and my st thought was that's just v i x backward but then we got a because they're the inverse but then i got this twenty eight j letter talking about a z i v security  why what is the name x i v symbolise and then more substantively are the zero i v securities the same thing or something very similar and why are they named that if you know again on this very question that's pretty much what i assumed but as misread interest points out it raises the question what are the calculating agents actually doing on an ongoing basis  you know is their role simply to have created the computer program that makes this happen or are they not supposed to be monitoring after all they have the authority to declare  market event market disruption of end and this is exactly the kind of thing it would seem to me that that responsibility has in mind if the vix futures are not being properly recalculated for an where if the elders the trading day if the closing indicative value cannot be properly calculated based on this automated process that we've been talking about the calculation agents have the power to go and say ok what should this price have been and then publish a price the closing price that is different from the one generated by the automated process but again that's something that happens after the end of the trading day and these other things substituting a different index that credit suisse were generous have a duty to the class to fix things every fifteen seconds and with respect to those undertakings that they have made those are things that cannot be done on a moment's notice and e so if we have a trader credit suisse as a trader in the market doing these hedges the truth is they're only in the market for about six minutes after the flat line occurs so they really only have six minutes in which they might have noticed what was going out of the dixie chicks market and further to the point that the district court made credit suisse a sales and they have trading so there's a trading group that is responsible for executing hedges vix futures market in there is a separate sales group different people who are responsible for marketing and managing x i v and those are the people who would be looking at the indicative values because that's telling that the credit suisse who was in the vix futures markets who therefore would have seen what was going on of those markets who just then had access to the indicative value for x i v and compare that to a notice that something was certainly there's no allegation that anybody could have done that in the six minute period and you know immediately upon noticing that forming a committee making decisions and issuing some response or some statement to the markets so the allegations of the complaint credit suisse is actually trying to reduce its exposure in this area it what must be the knowledge that that's going to require a great deal of hedging that's going to drive that price at which you sold these things down in the relatively near future even independent of an actual market spike and then that if there isn't a spike in the volatility it's really going to put enormous pressure on the price i guess i find it hard to believe that someone who's in the process of issuing those notes and isn't strategizing about what the possible future scenarios are and how you know what what's going to happen next week that's one thing to say oh we opportunistically sold because we thought we could sell at one hundred and forty dollars or one hundred and sixty dollars million dollars exposures x y z but the plaintiffs complaint makes perfectly clear throughout the complaint that credit suisse hedges all along the business model here is not to issue notes and cross your fingers and breaking up credit suisse because of its very high risk activities and and that was that was in two thousand and seventeen so and you make a point that  already anticipated back by the june statement and therefore hedging was was and is obviously a component of all of this trading and so the idea that they would hedge against the against the the the court found a manipulation here how can you manipulate without intending to do so that's one question if they found they found it and they found that no misrepresented representation covered the manipulation that's with the work orders of a plant understood understood so just looking at the complaint one of the central allegations of the complaint in your honor has pointed to it several times was the fact that in the middle of two thousand and sixteen credit suisse made a public announcement that it would have now have the ability to hedge its exposure to exegete by entering into swaps transactions with its counter parties swaps transactions basically give you the opposite of the x i v transaction if for example the price of excise the moves upward credit suisse would owe more money but a swap would pay credit suisse the exact same amount of money so by credit suisse by starting a went into the vix futures market at four pm on february th two thousand and eighteen and got one hundred and five thousand contracts one hundred and sixty seven dollars times the normal volume there is not a single fact in the complaint that supports that notion never had any of that before which based on everything else you see in the complaint is utterly untrue the complaint repeatedly alleges that throughout the history of exidy credit suisse hedge through the vix futures market and other well what i'm saying is that when you look at the complaint they tell you how they assume one hundred and five thousand contracts and they simply do a calculation that says what would it take to hedge one billion six hundred million dollars that that calculation ignores everything else in the complaint which emphasizes that credit suisse had already had in significant and a variety of ways well where where we were there facts were a scene where there are facts anywhere in the complaint or in the record exactly what was was happening there it seems to me both sides are engaged in certain speculations that almost contradict each other you're saying oh well we were already hedged but i  your brief as saying whatever was being done in the marketplace in early february by credit suisse shows that it couldn't have profited from the dramatic drop in the price question why isn't that why we want to find out whether these factual allegations which were supposed to take as true are true or they're not true your honor the because the plaintiff's burden of course to demonstrate th a short selling scheme to cause a death spiral but the allegations were rejected there was no finding of manipulation there was no finding of site because that's what you specifically found that there was near it was only speculation that not our factual position we're just looking at the hedging allegations of the complaint and saying you wouldn't have you couldn't have traded one hundred and five hours ahead already been had they allege without any factual support that we made five hundred million dollars  in all along the way you can have a complaint from a very specific allegations through hedging before two thousand and d eighteen actually save hundreds of billions of dollars by virtue d of our he so there are specific allegations in the complaint that d make it plain that we didn't hedge in significant quantities well before february two thousand and while yes it is true that we have to take as true the allegations of the that tells us that the way this product works for credit suisse is on the fees and that it is credit suisse is intention to be perfectly hedged in such a way that they can neither ga connection i'm sure you make a lot of money on the fees the question is is there anything in the prospectus that says you do not make money and will not make money by rises and falls in the price of this product is that representation made no your honor that that's not made obviously there was significant discussion of the fact that credit suisse may had to have a negative impact on the vix futures market and x y z investors the value of the notes and all of them and i have a problem understanding how you can have such a thing a manipulation which usually requires an chance as it seems to be that the district judge actually statement that she makes a finding of a manipulation you know it's often developed through discovery and it's developed through circumstantial evidence because nobody can know we've actually made statements about any of this stuff and that's why it's so difficult to deal with as long as there's an adequate leaving on the question then normally this is a matter for discovery and possibly trial possibly not later on when what one would be true isn't that that's exactly the point the question is is it at least as plausible not is it the most likely or that there's no other inference or that even it's the most likely you are more likely than the other inference it's at least as likely as it seems to me that you're in the position i mean yes the burden is on them for the pleading but in effect unless you can establish that it is or persuade us that it is more likely innocent explanation is more likely then there's then they're in the position that we could draw an inference from the what judge an apron referred to as the objective facts that are consistent with  manipulation well that's that's one inference and you've got another one and if yours is not more likely and it sounds to me very often is what you're saying is trust us where respectable we wouldn't do that because there are different ways that this could or sharply reduce the the x i d s and then they behaved and then they issued that they then they issued this this large amount of stock and it doesn't seem to me that you have to go back for just one second you know these are exchange traded this this x i v product is just like many other products issued by credit suisse and other banks it's a very well known product in the market it is not perceived as a product that is designed to fail or that is particularly susceptible of manipulation and credit suisse got into that business is the plaintiffs alleging in two thousand and ten without incident and proceeded to engage in that business for many years without incident and continue to increase the number of shares that it's all without incident at all along the way this does not present enormous risk plaintiffs on a daily basis credit suisse adjusted each hedges so as they sold more shares they adjusted their hedges market prices are just at their hedges so this is not a situation according to plaintiff complaint or credit suisse a tremendous exposure or tremendous incentive and again if you if you just look at the notion that the fundamental theory here is that the c e o and the c f o of one of the largest investment banks in the world woke up one day and said you know what this is an opportunity to make some real money let's exceed our own internal risk limits by ten thousand percent let's all of the compliance people and legal people and risk management people at our bank and just risk the entire banks by taking on a multi billion dollar exposure and let's see if we can manipulate the vix futures market which by the way all the trades in that market are publicly reported yesterday you know has access to all of those trading records all we're saying at the end of the complaint that rises to the level that this court has required over and over to establish some entering get over the pleading hurdles established by the court and  as far as you understand it in this far as what's in the record is the idea that as soon p did continue to put out prices  during this period only it's the frozen price and then when it hits your computers and affect your computers just recalculate to turn that into what the indicative price should be according to a formula  so that unless someone is noticing or aware that some p is continued projection of the same price means that something has frozen then as far as your systems are concerned everything's just going according to normal calculation that the idea that's correct and that's an important point because the minute did not stop market disruption of the on that of the concept and in the offering serials that is the situation where if credit suisse determines it has difficulty hedging because of such an enable credit suisse to hedge not for the benefit of investors so again just to just to make sure i understand what as far as you're concerned happens is that at whatever time for own right now there is a publication by s and p of  vix index price and then at four dollars on i and fifteen seconds there is another publication it may happen to be the same price but it's a new publication so it's not the case that  he says oh my god we're not sending anything out anymore for the next hour or something just breaks and nothing gets sent out for a nine and fifteen seconds something gets sent out it just happens to be the same as the last first argument what is the argument for why you would have a motive to participate in putting out a false number or not letting the public know that there was a problem and i have to imagine that duty to be monitoring as things go along that you're getting paid for a daily basis i'm sorry i'm there's no allegation that the calculating them today  plaintiffs are implying that there was some temporal and only obligation to have someone sitting there you know monitoring every fifteen seconds comparing the futures and to the imports deciding that there reason for you know them not fixing it but it doesn't absolve them of liability if they knew you know they were getting two hundred and forty prices that were off by eighty or ninety percent of the market and seven hundred million janice have a motive to knowingly let false information into the marketplace i just understand i understand you to say that your answer to that question is because they were too lazy to have a committee  t least as plausible as anything else to say that they intentionally let this happen that that strikes me as the question as well why would they do that why would it be plausible to think that they knowingly put out false information without any warning to the market when you know we have the possibility is that we're just asleep at the switch because the otherwise why wouldn't you say something  and i think there are a couple possible it's one they were you know they noticed but the person who noticed didn't have the know how or what to do to fix it and so they just kept distributing it you know to they were asleep at the switch and  do have a you know they were supposed to be monitoring and they're distributing statements are actively making a statement saying it's a computer program putting out false statements the market that it was their computer program you know if they didn't have some sort of you know please don't put f that they noticed that when and when counter speak and say well you know they might not have looked at this they might have looked at that they had this data but they didn't have this data that it might not have had this open our screen you know it requires a series of increasingly implausible that for nobody at janice and nobody at credit suisse to have not noticed this for an entire hour and i think it's plausible that they didn't notice why they didn't correct it immediately janice however i don't think it's implausible that they were doing their job and doing it with a modicum of awareness it shouldn't be implausible that i mean they don't do much of their core responsibility janice calculate this value that was their main job so i don't find implausible that janice was doing its job as it was opposed to  as they said they were in the offering statements as a whole sense of like we should do you know credit with wouldn't do this they always do things properly janet says just yet we're saying that they were saying that doing things properly they're actually doing what they're supposed to and if they did what they were supposed to do then you know they would have to test and why they didn't correct it you know they should know why do people do things wrong why do people make mistakes you know i don't know i don't know what's their mind three little bits over an hour period that's not a natural market move and any sort of actively trade secure in this was one that was over one hundred and sixty dollars times volume moved every every tech it was just frozen if you looked at it for than thirty seconds you would know that there's something wrong and then and it was not easy and this is also the most important hour in the securities history like it was it was a major news event it was the eyes of the market were on this and presumably janice was saying oh this is you know i'm going to i'm going to pay attention now it's the but i'm not you know back to my you know n b c you know allergy like the world series the pitch was frozen going like that they knew it was false and disseminating it and you know our argument the alternatives they were reckless in if they didn't know but our primary argument that they knew that they were that it was false their what is your response of the market manipulation argument the other side is making that these were just normal market activities that this was just you know the way the way the way things operate in the market there's no no evidence of real  here no no intention of any sort that it was just just they were just you know operating according to what they were permitted to do given the instruments out there and that they had adequately disclosed the a that they knew they were going to have to hedge and they knew that that would dramatically shift the balance and in a spike situation because the market to matter of public record that the vix futures at this time period were trading at one hundred and sixty seven dollars times normal volume and credits with had an enormous need to hedge and they had sold  that you know monitored risk actively don't have to approve levels of risk and then also the c e o said when this product collapse of he collapse the product to benefit investors that's you know the c m was this is this is a big deal and you know that i don't see how investors are protected by the collapse the product you know the highest level of princes management was involved with this you know  i don't agree that this is you know just business as usual this is this is an extraordinary event in the market a lot of people lost a lot of money very fast and you know i believe it was predictable and the credit suisse knew was you know it was going to happen when they should be security market they're going to have that they knew they were going to have more of it they made that announcement in july of two thousand and sixteen that does evidence to some extent the fact that they knew that this was high risk and that they would have to hitch so there's a lot of knowledge in here it's just a question of every detail of the scheme that you've laid out i think that's why the district court decided informative argument