Sunday, 25 September 2016
Last updated 2 days ago
Aug 16 2012 | 11:03am ET
A hedge fund's lawsuit against a major exchange has new life.
A state appeals court in Illinois overturned a lower-court ruling that threw out Platinum Partners' complaint against the Chicago Board Options Exchange. Platinum claims it lost $10 million when the CBOE and Options Clearing Corp. mistakenly cut the strike price on India Fund options and then improperly gave that information to some market participants.
The district court ruled that, as self-regulatory organizations, the CBOE and OCC could not be sued. But the appeals panel was not willing to grant SROs "complete immunity from lawsuits."
"While the price adjustment itself may have been a regulatory decision, the manner in which it was disclosed—privately and prematurely—to the John Doe defendants was not," the court wrote. Platinum has also sued the sellers of the India Fund options, the John Doe defendants.
"In addition to its quasi-governmental functions, defendants CBOE and OCC have a private, for-profit business, and in the private disclosure of the price-adjustment decision to the John Doe defendants, they were acting in their private capacity and for their own corporate benefit. Therefore, this non-public announcement cannot be construed as conduct under the delegated authority of the Securities Exchange Act of 1934 and thus cannot be protected by the doctrine of regulatory immunity."