The Last Look…

Regular readers know that I am no fan of some of our friends in the legal profession, so I am curious as to who is driving the defence in the ongoing lawsuit against Currenex et al, because I will confess to being a little bemused that it is actually still going on.

Last week, a US judge dismissed (and was dismissive) of the latest arguments from Currenex, that XTX, one of the plaintiffs, should hand over its trading source code. For those of you new to this, or who have forgotten, Currenex and the other defendants (HC Technologies, Goldman Sachs, State Street Bank and Trust and five individuals) were accused of allowing undisclosed priority access to its order book and trade details. A couple of manual traders started the class action, but it seemed pretty clear that the defendants thought they could outlast (financially) those (extinct) firms. A spanner was then well and truly thrown in their works by XTX, who, with its financial muscle, joined the class action.

Since then, the defendants seem to have been engaged in a long drawn-out process to delay the case by multiple means – there have been several Motions for Extension of Time and Motions to Dismiss – but nothing has brought the sorry saga to an end. Which is why I ask the question, ‘who is actually driving this – the defendants or the lawyers?’

Now that the judge has ruled on the request for XTX to reveal its source code, I can confess that when I first heard of it, I thought it was ridiculous – surely if one trading firm is forced to reveal trading code then all could be compelled – where would that leave markets? We see enough court cases around allegations of code “theft” to know that source code is the USP of every provider – even if they are, at some level, very similar – I suspect such a ruling would open the door to all kinds of frivolous lawsuits aimed at accessing those USPs.

The counter-claim for the code (the plaintiffs had requested Currenex’ matching logic to understand its rules) smacks of another delaying tactic, so perhaps the defendants still hope to outlast the plaintiffs? If they do, I would suggest they do not know their opponent. This is not going to go away.

There are some in the industry who have suggested to me that the outcome is inevitable, pointing to the offloading of HC Tech’s FX business to GTS in 2023, and the Currenex brand being swept up (less than a year after the lawsuit was filed) into the rebranded GlobalLink FX, as evidence damage limitation is already being practiced. I have normally responded by observing how the US legal system has bemused me several times with its view of the FX industry, so nothing is inevitable.

We should not forget that one of the fundamental principles of the multi-dealer platform world is under the microscope here

What looks, to an outsider at least, as delaying tactics, are not only casting a cloud of some existing businesses, however, they are also tending to mask the serious nature of the original allegations. This happens in a great number of court cases, I am sure – it is the lawyers’ jobs to create certainty in defence and confusion in attack and vice versa – but we should not forget that one of the fundamental principles of the multi-dealer platform world is under the microscope here. These venues are built upon fair access – within the limits of natural latency, and even there a mitigation framework often exists – so if a venue was indeed abandoning the FIFO principle, and not revealing it; as well as providing what should be confidential data to a small number of participants, it would be a serious matter.

That seriousness could be why the case is being extended – if a guilty verdict was passed down, would an ambulance-chaser approach the other platforms? After all, there could be an argument that their businesses would have been negatively affected, should such behaviour have taken place, because Currenex would surely have seen a larger proportion of the business from those with the alleged priority access? That is something State Street would want to avoid were things to go against it

Overall though, this does feel like the lawyers are running through the longer version of the delaying playbook. Perhaps someone, somewhere, thought that threatening XTX with having to reveal its source code would scare the firm off, but to repeat myself, this ignores who they are dealing with – a firm that feels wronged, believes it has all the evidence it needs to prove that it has been wronged, and, importantly, has – and is willing to deploy – the financial clout necessary to push the case through to an end.

colin@thefullfx.com