Opinion ID: 8410533
Heading Depth: 2
Heading Rank: 2

Heading: High Frequency Trading Firms

Text: In the years following the SEC’s promulgation of Regulation NMS, the use of high-frequency trading rose dramatically in the U.S. stock markets. According to the plaintiffs, HFT firm transactions now account for nearly three-quarters of the exchanges’ equity trading volume. HFT firms, using sophisticated, computer-driven algorithms to move in and out of stock positions within fractions of a second, make money by arbitraging small differences in stock prices rather than by holding the stocks for long periods of time. The firms employ various trading strategies that rely on their ability to process and respond to market information more rapidly than other users on the exchanges. Relevant to this appeal, the plaintiffs allege that the firms engage in predatory practices, such as repeatedly “front-running” other market participants: anticipating when a large investment of a given security is about to be made, purchasing shares of the security in advance of the investment, and then selling those shares to the buying investors at slightly increased prices.