NEX Group, which is the company that was formed after ICAP plc sold off its voice broking business, has been cleared of wrongdoing in a class action case in the US. The company announced that the firm’s subsidiaries ICAP and ICAP Europe Limited have been dropped from the legislation.
A number of investors claimed that the firm adversely impacted their trades by using a practice called ‘spoofing’ when the interbank market was setting Euro Interbank Offered Rate (Eurobor) rates.
The practice of ‘spoofing’ is widely viewed as a big problem in algorithmic trading. An algo can quickly create orders that impact market prices without the sender having the intention of execute any of the orders.
Back in November, British trader Navinder Sarao has admitted to using the practice to manipulate market prices during the 2010 ‘flash crash’ episode. On the 6th of May, the trader used the practice while trading the S&P 500 index futures.
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Eurobor Ruling Coincides with JPY and USD Libor
The judge appointed on the case states that the various investors who alleged manipulation of the Euribor did not submit enough evidence against the firm.
According to the court’s order, the complaint against ICAP fails to allege that ICAP actually undertook action to spoof Euribor submitters. The document also states that the plaintiffs failed to allege any United States connection to the alleged communications.
The news is consistent with other cases pertaining to yen Libor and US dollar Libor rate allegations that have shown no personal jurisdiction over ICAP entities.
The liability for ICAP plc resided with NEX Group plc, as did that of ICAP Europe Limited under the terms of the recently completed transaction with Tullett Prebon.