CME Group Beats Class Action by Commodities Traders

Concluding a legal battle which has stretched more than a decade, a Chicago jury recently returned a verdict in favor of CME Group Inc., and against a group of commodities traders claiming wrongful denial of access to an Aurora data center specifically built by the exchange for high-speed algorithmic trading in 2012. After only four hours of deliberation, jurors in the Circuit Court of Cook County rejected the traders’ request for $2 billion in damages, finding their rights as Class B shareholders had not been violated.

The underlying facts date back to the early 2000s, when members of the Chicago Mercantile Exchange and Chicago Board of Trade (CBOT) voted to demutualize ahead of their merger into CME Group in 2007. Plaintiffs claim their Class B memberships granted them certain rights under the demutualization plans – specifically, exclusive and best proximate access to any trading floor operated by CME Group. The Aurora data center – which CME Group built in suburban Chicago to support the rise in high-speed algorithmic trading – allows any trader to access its servers and electronic trading floor. According to Plaintiff’s, this design significantly atrophied the value of their Class B shares and violated their membership rights under the demutualization plan. Stephen Morrissey of Susman Godfrey LLP, counsel for the traders, argued before jurors that this constituted a breach of contract, of good faith and fair dealing, and that trial evidence had proved CME leaders who designed the demutualization had “entrenched themselves and enriched themselves at the members’ expense.”

CME Group, represented by Skadden Arps Slate Meagher and Flom LLP, categorically denied these claims and asserted the lawsuit represented nothing more than buyers’ remorse of traders who sold off the Class A shares they received in the demutualization agreement. Those shares, which are worth millions presently, were specifically issued as a hedge against the potential devaluation of Class B shares caused by expansion in high-speed electronic trading. Hogan, making his closing arguments before the jury, called the bid to collect more profits than their Class B shares entitled them to “antithetical to everything the exchange has done and every reason why [CME Group] set up the demutualization.”

Several high-profile CME executives testified at trial. CME lead director and former CBOT executive, Charles Carey told jurors the demutualization plan granted no exclusive right of access to the Aurora data center because it would have “destroyed the value” of CME’s entrance into electronic trading. CME Group CEO Terry Duffy denied that CME foresaw a dominating rise in electronic trading at the time of the demutualization, and CME global market solutions managing director Elizabeth Gisch told jurors open-outcry traders had been paying for access to electronic trading platforms alongside nonmembers for at least a decade without complaint when the Aurora data center opened.

Jurors seemingly agreed, promptly relieving CME of any liability for the allegations levied against them. A website for the lawsuit informed class members expressed disappointment in the verdict and that post-trial and appellate options were currently being evaluated.

For more information on developments financial and securities litigation, please contact any of the qualified attorneys at Rock Fusco & Connelly, LLC.